Four Cryptocurrencies That Could Suffer If Bitcoin Crashes in 2018

Bitcoin crash
Credit: iStock.com/Iaremenko

Will Bitcoin Crash in 2018?

For most investors, 2017 was a pretty stellar year. The S&P is up around 20% since this time last January. But as good as that might have seemed in more usual times, these are anything but. After all, who would settle for a measly 20% return these days, when Bitcoin (BTC) is up 1,500%?

Here’s the problem: In classic Newtonian style, what goes up must come down. And that has pretty much everybody wondering: Will Bitcoin crash in 2018? Without knowing for sure whether Bitcoin is in a bubble, it’s hard to say if a BTC crash will occur or, worse, whether a BTC crash will spiral outward into a broader cryptocurrency crash.

For crypto investors, Bitcoin is undoubtedly the grande dame of the market, but she isn’t the only woman on the dance floor. With a market cap of almost $247.0 billion against a total cryptocurrency market cap of around $733.0 billion, it’s hard to imagine a world where Bitcoin crashes and all other cryptocurrencies escape unaffected.

If you’ve invested any money in cryptocurrencies, then today’s topic will be a big one for you. Here are four cryptocurrencies that could suffer along with Bitcoin in 2018.

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Will Bitcoin Crash?

One of the enduring realities of investing in cryptos is that there are a lot of unknowns. That’s why it requires an iron stomach. After all, the greater the risk, the greater the potential reward. It’s no wonder it drives some investors wild.

But because cryptocurrencies are so famously volatile, the short answer to whether Bitcoin will crash in 2018 is…nobody knows.

So far, most analysts have struggled to accurately predict Bitcoin’s price. Back in October 2017, experts were predicting Bitcoin would hit $6,000 by the end of the year, a number off by about $14,000.

What that means is that Bitcoin might not crash in 2018 after all. A lot of analysts, like Roger McNamee, think that Bitcoin has a long way to run yet. McNamee is the co-founder of Elevation Partners and an early investor in Facebook Inc (NASDAQ:FB). According to him, the crypto market is still relatively tiny. (Source: “Tech Investor Thinks 2018 Will Be Decisive Year for Bitcoin,” CNBC, December 28, 2017.)

Julian Hosp, over at TenX, has two predictions for Bitcoin: that it will reach $60,000 and that it will reach $5,000. He’s just not sure which one will come first. (Source: “Bitcoin could hit $60,000 in 2018 but another crash is coming, says startup exec,” CNBC, December 26, 2017.)

Bitcoin Crash History

For a lot of worrywarts, one of the reasons that inevitably comes up for an eventual Bitcoin crash is that “it’s too good to be true.” It’s grown too much, for too long, and is due for a serious readjustment.

And in fact, in mid-December, Bitcoin plunged from its high of $20,000 to almost half that. That would be a severe setback for any company to weather.

But would you believe me if I told you that isn’t anywhere close to the worst readjustment Bitcoin has seen?

Back in 2013, Forbes noted a couple of noteworthy Bitcoin calamities, including:

  • A 68% crash in only four days back in 2011…that eventually resulted in a total decline of 94%
  • A 36% decline in January 2012
  • A 51% plunge in August 2012
  • A 33% setback in March 2013…in only minutes
  • A 61% catastrophe in April 2013

If Bitcoin reached $500.00 by 2018, Forbes noted, it might well be a miracle. (Source: “An Illustrated History of Bitcoin Crashes,” Forbes, April 11, 2013.)

What this Bitcoin crash history shows is that Bitcoin isn’t due for a setback or correction…it’s had them. Over and over. And each time, it’s come back stronger than anybody expected.

That’s not to say that Bitcoin can’t or won’t experience something worse in the future, but we’d do well to remember that it has shown significant resilience so far.

Four Cryptocurrencies That Could Suffer with Bitcoin in 2018

The thing to remember about Bitcoin is that it isn’t just one currency among many. As the first and most significant, it also serves as a gatekeeper to a lot of others. That means investors must buy their other cryptocurrencies in Bitcoin.

So it only serves to reason that the fates of these intertwined currencies would be, well…linked.

Cryptocurrency Symbol Chance of Decline in a BTC Crash
Ripple XRP Medium
Ethereum ETH High
Bitcoin Cash BCH High
IOTA MIOTA High

But each of the larger Bitcoin competitors offers something that Bitcoin doesn’t. That’s why they’ve also attracted significant attention and investment. Often, this can serve to help isolate and protect them from a potential Bitcoin crash.

To better understand how these four prominent cryptocurrencies would fare in the event of a Bitcoin crash, let’s compare them to the events of this past December.

To jog your memory, here’s a chart of Bitcoin’s dramatic price drop, roughly between December 15 and December 22:

Will Bitcoin Crash in 2018?

Chart courtesy of TradingView.com

Will Ripple (XRP) Crash with BTC?

The world’s third-largest cryptocurrency by market cap, Ripple is very different from Bitcoin. The majority of XRP is still owned by the company and its founders. It has become something of a darling of big banks and payment networks.

Here’s how it weathered the December drop:

Will Ripple Crash with BTC?

Chart courtesy of TradingView.com

Ripple’s price did not vary significantly. Of course, this does not mean that it would be unaffected by future changes in the value of Bitcoin, but it does give us some degree of certitude.

Will Ethereum (ETH) Crash with BTC?

No. 2 on the charts, Ethereum boasts a market cap just over $130.0 billion. However, its price has exploded recently to top $1,000. Many believe that Ethereum and Bitcoin have a staying power that many other cryptos don’t. (Source: “Bitcoin and Ethereum Predictions,” Fortune, July 25, 2017.)

Will Ethereum Crash with BTC?

Chart courtesy of TradingView.com

Unlike Ripple, Ethereum did plunge in mid-December, although this was delayed slightly from Bitcoin’s drop.

Will Bitcoin Cash (BCH) Crash with BTC?

A direct result of Bitcoin’s famous scalability debate, Bitcoin Cash is a “hard fork” that split from Bitcoin on August 1, 2017. In that time, it has grown to a market cap of over $45.0 billion, making it the fourth-largest cryptocurrency. With some prominent supporters and investors, Bitcoin Cash has been broadly adopted by digital currency exchanges.

Will Bitcoin Cash Crash with BTC?

Chart courtesy of TradingView.com

As with Ethereum, Bitcoin Cash also experienced a significant drop in value in the middle of December.

Will IOTA (MIOTA) Crash with BTC?

Dropping down the list of prominent cryptos to No. 8, IOTA is different than Bitcoin in a few significant ways. Built on the mathematical “Tangle,” IOTA serves a particular niche: microtransactions on the Internet of Things. That’s why this comparison is so essential: IOTA operates fundamentally differently than Bitcoin. (Source: “A Cryptocurrency Without a BlockChain Has Been Built to Outperform Bitcoin,” MIT Technology Review, December 14, 2017.)

Will IOTA Cash with BTC?

Chart courtesy of TradingView.com

As the chart above shows, IOTA also experienced a significant drop in value in the middle of December 2017.

What Does This Mean?

It’s important to remember a few fundamental things about cryptocurrencies:

  1. It’s almost impossible to tell what is going to happen.
  2. It’s almost impossible to know why something happened.
  3. They’re primarily speculative at this time.

What that means is that a BTC crash will almost always send ripples through the broader crypto community. The value of each currency is partly the strength of what it offers with its chosen niche and partly the psychology of the community.

When one large coin tumbles, investors panic and other coins react. As we’ve pointed out before, this is called “behavioral finance,” and it’s the intersection between human psychology and financial decisions.

Is the Crypto Market in a Bubble?

A good question to ask is why Bitcoin is tanking. Sometimes there’s a clear answer. If it’s a Bitcoin bug, like the one that caused Bitcoin’s crash in March 2013, the wider impact is likely to be very different than a crash caused by a major political event like a government moving to ban initial coin offerings (ICOs), as China did in September.

As long as demand for cryptos in general (and Bitcoin specifically) continues to grow, it’s likely that the price will continue to climb along with it.

Check out the difference between the interest in buying versus selling Bitcoin in Google trends.

The interest in buying far outranks the interest in selling. There is always the chance of a cryptocurrency market crash. But as long as demand continues, Bitcoin and by extension, the other major cryptocurrencies, are likely to continue full steam ahead.