From the outside, all digital assets look the same. A lot of volatility. A lot of upside potential. Not a lot of variety.
This two-dimensional view of cryptocurrencies is pretty common among newbie investors, but experienced hands know it’s not true. There’s a world of difference between Monero and XRP, or between NEM and Dash. Cryptos are not one and the same.
Investors learn these nuances over time. Another important lesson is about “safe-haven assets.”
According to conventional wisdom, Bitcoin is the safe-haven asset of cryptocurrencies. It’s the asset people go to in times of panic, when there’s a bear market or a price crash. In other words, it plays the same role as gold does in regular financial markets.
During these moments of panic, some investors will leave the market altogether. But many stay within the ecosystem, rotating their funds to Bitcoin instead.
That may change in 2018.
Why? Because Ethereum is silently usurping Bitcoin’s role as the safe haven of cryptocurrencies. This story becomes obvious once you look at the ETH/BTC ratio.
ETH/BTC Price Chart
As you can see, it’s become cheaper and cheaper to buy ETH with Bitcoin. If this trend snapped during the January 2018 crash, I would believe that Bitcoin is still the safe haven. But that’s not what happened.
BTC prices collapsed, losing almost 40% of their value in less than a month. ETH prices are only down 30% and they held up for longer than Bitcoin.
Furthermore, the driving forces behind the bear market are targeted more at Bitcoin than Ethereum. National governments are desperate to protect their currencies from Bitcoin. But do they really care about decentralized applications? Not so much.
I’ll end it there for now, but if you’re unconvinced, please read this essay by Ajit Tripathi from ConsenSys. It overlaps a lot of my argument. (Source: “Don’t HODL, BUIDL: How Blockchain Tech Will Add Value in 2018,” CoinDesk, January 22, 2018.)
Analyst Take
We maintain our $1,500 Ethereum price forecast for 2018.
Source: Price Confidential