Bitcoin Falters as #1 Gateway Crypto and a Challenger Emerges
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A Gateway Crypto is one used as an intermediary when buying alt-coins with fiat currency like US Dollars. Most alt-coins don’t trade directly against fiat currency and so typically buyers have purchased Bitcoin with their fiat currency and then bought the alt-coins they want with the Bitcoin. Almost every alt-coin currently has a Trading Pair with BTC and up until now this is pretty much how the Crypto market has worked. Unfortunately the big fiat exchanges don’t trade a lot of alt-coins and the big alt-coin exchanges do not trade fiat and so there is a transfer between these exchanges which is often required. The workflow looks a bit like this.
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This is basically how the alt-coin market has been functioning up until now and it is one of the reasons that alt-coins often sell off whenever Bitcoin sells off. They are linked by the trading pairs and so while the price of an alt-coin in BTC might not change, if BTC goes down in fiat value then the alt-coin goes down in fiat value too. This is one of the major issues in the way the crypto market is currently structured and it is amplified by the current problems with Bitcoin.
While some might argue that Bitcoin has been wildly successful, it has not really improved at all and it is not keeping pace with the broader Crypto market from a technology perspective. I have been concerned about Bitcoin Core moving away from promoting BTC as a Currency and positioning it more as a Store of Wealth. While I fundamentally disagree with this, my opinion is pretty irrelevant. However, the undeniable fact is that fees on the BTC network are soaring and what that means is that it is not very attractive to use Bitcoin as a Gateway Crypto any more due to Step 3 in my workflow above costing potentially a $50 USD transaction fee. For many alt-coin buyers that trading fee is prohibitive. However, many fiat exchanges have started trading Ethereum and the fees to transfer Ethereum are a fraction of Bitcoin so here is a workaround.
There is an extra step here but in many cases the trading fees for the new Step 3.5 plus the transfer fee of Step 3 is still cheaper than the cost to transfer Bitcoin. So while it takes a bit more effort it makes sense to do it this way. You can see where this is heading now right?
This is already starting to happen with many exchanges expanding the number of ETH trading pairs they offer. Bitfinex has recently created a new platform called Ethfinex which is specifically for trading ETH pairs. Binance (which is one of the new big alt-coin exchanges) offers almost as many ETH trading pairs as BTC. If we do a quick count of the number of trading pairs at the main alt-coin exchanges you can see this emerging trend is becoming clear.
| Alt Exchange | Founded | BTC Pairs | ETH Pairs | Percent |
|---|---|---|---|---|
| Poloniex | 2014 | 67 | 12 | 18% |
| Bittrex | 2014 | 198 | 58 | 29% |
| Binance | 2017 | 97 | 95 | 98% |
I had originally thought that Bitcoin Cash would be the main threat to Bitcoin and it still might be the case. I had been watching to see if exchanges added support for BCH and whether they would add trading pairs for BCH but I have noticed that the Bitcoin war is very politicised and it is probably bad business for exchanges to be picking sides. But while all this kerfuffle has been going on ETH has been making steady gains and ETH has none of the internal conflict of the Bitcoin communities.
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I’m not saying ETH is perfect. Far from it. I am a pragmatist though and despite the security concerns, the lack of a coin cap, the risk of Vitalik leaving and some of the congestion caused by those crazy Crypto Kitties, ETH is still a better performing blockchain technology than Bitcoin. ETH now has enough market adoption to seriously challenge Bitcoin as a more effective medium of exchange in the Crypto world. ETH might not take over the Market Capitalisation of Bitcoin but it can usurp it as the preferred Gateway Crypto CURRENCY, which is kind of ironic because ETH was never designed to be a currency.
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If these trends continue it is going to lose all the utility it once had and it’s fall from #1 is almost certain.
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With Bitcoin fees rising, the Ethereum network getting congested due to digital felines, and Ripple overtaking Ether as #2, it might not be long until Ripple takes over as the primary gateway crypto. Thoughts?
This is a good question and I am aware that Ripple has actually just overtaken Ethereum for Market Cap to become #2. It's kind of a big deal.
But when I looked around some of the exchanges I didn't see a lot of Ripple trading pairs. That's why I think ETH is going to be the one chosen by the market as the new #1 Gateway Crypto.
That makes sense. And I think you're right, at least for the short-term. Bitcoin hasn't done much to address the issues which is catching up to them. It was designed to be a currency and because of its issues can't be used effectively as a currency. If Ethereum can get it's congestion issues sorted out, you're probably right that it could overtake BTC.
I think the Crypto Kitty fad has died down a bit now so fees are reasonable currently. They do still need to scale better but are already well on their way to being able to handle more than Bitcoin and that's all they need to do to get the #1 job right now.
It would make sense for it to have died down. It was basically some form of a pyramid scheme. Everything about it relied on getting more people involved. They also charged fees on every action and the assets decayed with each action.
And yes, Ethereum doesn't need to outrun the bear...just Bitcoin. Ha ha
Dogecoin will stand above all other cryptos, dogecoin is the future. Cryptokitties? Who needs that when u can get doge. Not to mention how stable doge is!
1 doge = 1 doge
Dogecoin is going to the moon, then to mars, then out of the milkyway to overtake the entire universe and become singularity with all things.
Friggin hilarious!
Funny stuff. Have to admit I've never owned a single Doge :)
You can easily buy them, or exchange them even without registration on sites like blocktrades.
If u want to give me ur address I'll send u some :)
Thanks, I appreciate the offer. But I thought Doge was intended to be a joke coin.
It started as a joke coin, but has actually become reasonably useful. Lower fees and faster confirmations than bitcoin or litecoin. As a medium of exchange, it's quite good. I have paid bills at Living Room of Satoshi with it.
Probably wouldn't use it as a store of wealth.
I made the switch to ETH a couple weeks back after Bitcoin pretty much held me hostage with it's ridiculous transaction fees. I also sold a bit of my longer term Bitcoin holdings.
I can see a lot of people making the switch. I'm just hopeful that it is a gradual and smooth transition so that the decline in BTC doesn't hurt the alt-coin market.
This is definitely happening now, I've been loving Binance for all the ETH based trade options, it's unreasonable to send BTC when I'm only moving small amounts. (PS you had a perfect chance to drop your referral code...lol, I'm always peddling mine, such a great referral system.
Yeh, I'm not really keen on peddling referrals. I'm not really referring Binance here anyway but it was signing up there recently that helped me realise the new trend with ETH pairs. I should have done some more analysis on the other exchanges but wanted to get the idea out there since a couple of people had been asking about alternatives.
I want some steem/other alt coin pairings! I think the exchanges would be surprised how popular these could become.
I would love to be trading an ETH/STEEM and ETH/SBD pair. I wonder if we will see this soon one of the big alt-coin exchanges.
If only, I just wish I could send steem to Binance...lol.
Bitcoin's slow as shit and its fees are rediculous!
Have you been using ETH instead? I'm curious to know how others are getting around BTC.
The lil BTC I have I'm just sitting on it now. Litecoin is my goto, I've made a few metal purchases with it and I like that it's so fast and the fees are low. From my experience BCH does everything BTC should but better. I wonder how long it will take before ppl realise Bitcoin sucks?
I think the market is gradually figuring out that right now. But I'm hoping Bitcoin has a slow decline so that the alts can have a chance to shine and get the trading pairs set up so that we aren't being led up and down by BTC.
I think all that Bitcoin has going for it right now is good "branding". It's sad because of what Bitcoin could have been.
It's sad because of what Bitcoin has been. It will always go down in the history books as the first crypto and it broke a lot of new ground, but it has lost its way.
Eliminate step #1 for ultimate profit it only took me 1 month of mining xmr with my computer to buy a lifetime 10 h/s contract. maybe it wasn't profitable with the electricity bill but now I am sleeping easier.
Congrats. I do think profitable PoW mining has probably seen it's best days.
Hmm, I don’t know if I agree with this sentiment. Bitcoin as a store of wealth is still hugely powerful, if only for the first mover brand name that it’s achieved.
Avoid having Bitcoin in your portfolio at your own peril ;)
I accept the peril. The fact I am being so public with my opinion on it pretty much means I am going to wear it one way or the other, but thanks for your concern.
Pretty happy not to be in Bitcoin the last couple of weeks at least ;)
;) Haha, I hear you there!
No worries man, see you around in 2018 :)
I think ethereum is good, but ripple is faster again still!
Where can I find a decent amount of trading pairs for Ripple though?
At the moment nowhere, but I think it'll grow!
I just use it for all inter-exchange trades and transfers because I know I wont be worrying for so long :)