For some reason, Bitcoin forks have been rallying extremely hard over recent days.
Bitcoin Gold and Bitcoin Diamond have gained approximately 20 percent in the past two days alone, making them the best-performing digital assets in the top 100 coins by market capitalization. Litecoin, too, has performed well over recent days, actually outperforming Bitcoin over the past week.
The LTC rally is somewhat explainable: the coin was added to PayPal’s cryptocurrency service for some reason, meaning that it is likely seeing a bid from retail players that don’t know much about digital assets.
Avi Felman of BlockTower Capital noted, for instance, that LTC actually bounced higher at 5:00 pm EST earlier this week. This indicates that retail users bought the coin after work.
The rallies in the other forks, though, came out of left field. Why would these tokens that were previously dormant suddenly surge higher?
Right now, no one is too sure. If you search up the forks on Twitter, you will be hard-pressed to find an actionable bit of information that would have catalyzed this move higher.
These coins are dropping somewhat after their initial pumps but remain far above the price points of just days ago.
It is possible that this rally has to do with the ongoing Bitcoin Cash fork situation, which is going another consensus split/fork over further changes to the protocol.
It is unlikely that this is the start of a longer-term rally for these coins: many in the crypto industry, namely those involved in decentralized finance, expect a further repricing of assets toward more “useful” cryptocurrencies and chains.
The end of ghost chains such as Bitcoin forks
Eric Conner, an Ethereum podcaster and developer, recently explained that from a fundamental standpoint, it is unclear where there is about nine times the amount of capital in “zombie chains” with little on-chain activity such as Bitcoin forks than DeFi coins:
“Zombie chains and DeFi protocols still need a massive relative repricing. Combined MC of XRP, BCH, LTC, DOT, BNB, ADA: $33bn. Combined MC of UNI, AAVE, SNX, YFI, MKR, COMP: $4bn Right…”
Zombie chains and DeFi protocols still need a massive relative repricing.
Combined MC of XRP, BCH, LTC, DOT, BNB, ADA: $33bn
Combined MC of UNI, AAVE, SNX, YFI, MKR, COMP: $4bn
Right…
— Eric Conner (@econoar) November 15, 2020
Jason Choi, head of research at Spartan Capital, has echoed this sentiment.
As reported by CryptoSlate, he said on investing in Bitcoin forks:
“I can’t find a defensible thesis for most $BTC forks (LTC, BCH, BSV) over the long term. With the emergence of fee-accruing tokens in DeFi, seems natural that capital parked in these glorified digital pet rocks either flow to BTC or to DeFi.”
Unless smaller proof of work chains find unique use cases to attract new users, they may lose market dominance, in terms of users and the values of their underlying tokens, to more useful projects. Right now, the coins that are soon as the most useful are largely DeFi coins.
The post BTC forks Bitcoin Gold and Bitcoin Diamond mysteriously pump 25% each appeared first on CryptoSlate.
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