Vitalik Buterin, the globally renowned creator of the Ethereum blockchain decided to get rid of certain altcoins in his portfolio. These are the news the world woke up to last week, amid the chaos of bank runs and collapsing startups. Whilst selling and buying cryptocurrency assets is now as common as buying bread, Ethereum’s founder has once again raised an important question.
What is the main pushing factor behind altcoin valuation?
Naturally, we decided to take a closer look at how value is built and what differentiates a good crypto portfolio from a bad one. Is it the hype, or is it all down to utility and what the coin does on a global scale, for the global good?
What is value?
Before we dive any further, let’s dissect what value really is in all its application forms. It is not a secret that the term “value” can have different meanings depending on the context in which it is used. In general, value refers to the worth, importance, or usefulness of something. For example, a product or service may have value if it solves a problem, meets a need, or provides benefits to the user.
In economics, value often refers to the monetary worth of a good or service. It can be determined by the supply and demand in the market, as well as by factors such as scarcity, production costs, and utility.
Circling to ethics and philosophy, value can refer to moral or ethical principles, beliefs, or ideals that individuals or societies hold dear. For example, values such as honesty, fairness, and respect are considered important in many cultures.
The crypto value
In order to succeed, a cryptocurrency must combine the general, economic, and philosophical meanings of value. It should be able to solve a problem and provide a benefit, serve as the utility, and have a clear supply and demand logic. Last but not least, the logic behind it must be fair, following correct principles and carrying good.
Now how many altcoins boast all of the above? Hardly any, apart from the ones that govern the market itself. Whilst getting rid of his 220ETH worth of altcoins, including CULT, BITE, and MOPS, Vitalik Buterin said:
They have no redeeming cultural or moral value, and will probably lose you most of the money you put into them. I anti-endorse these projects to the greatest extent
One should note that this does not relate to crypto as a whole and the recent banking fallout of 2023 is a perfect example. Let’s now shift to Bitcoin and Ethereum, the pinnacle of the cryptocurrency space.
Banks’ failures make crypto stronger
The start of 2023 saw one of the greatest banking recessions in the last decade. Signature, Silvergate, and Silicon Valley banks, all fell at the same time. Suddenly and without any notice. As with any crises, there were reasons for it and reasons were two. The mind-boggling failure of FTX dragged crypto prices down, putting a lid on exposed banks, and improper asset management, is clearly visible with SVB.
It then came as a total surprise, that this time, crypto did not spiral down together with the rest of the financial industry. Instead, we saw a bull run that pushed Bitcoin to trade at $26,000 – a level, the crypto community has started to forget. The upward movement of BTC price began at $20,000 and just kept on rising, ignoring of USDC depegs, and a total collapse of some very serious banks.
What does it tell us? Bitcoin was long praised as the crypto alternative to gold. This comparison was quickly forgotten and maybe it is now, that Bitcoin and Ethereum are taken as a store of value and high utility assets.
These prime cryptocurrencies manage to combine every meaningful aspect of value and are, therefore, the ones to keep an eye on. You may be wondering what makes even crypto pessimists change the rhetoric on Bitcoin and Ethereum. And it must be the banks, as the more they fail, the faster crypto will rise.
Final words
Bitcoin is considered a commodity and a financial product in the world of finance. As a commodity, Bitcoin is similar to gold or other precious metals in that it has a limited supply and can be used for investment purposes. Investors can buy and hold bitcoin as a long-term investment or trade it on exchanges for profit.
Thinking of financial products, Bitcoin is often compared to traditional currencies like the US dollar, the euro, or the Japanese yen. Bitcoin can be used to buy goods and services just like traditional currencies, and it can be exchanged for other currencies or used as a form of payment.
In addition to being a commodity and financial product in its own right, Bitcoin has also given rise to a range of other financial products and services. These are now widely accessible through cryptocurrency exchanges like Gate.io and include Bitcoin futures contracts, options, and even exchange-traded funds (ETFs) that track the performance of Bitcoin.