What caused this sudden rotation—was it an unexpected bout of bad Ripple news? Sadly, no.
Cryptocurrencies should trade independently, based on their underlying strengths or weaknesses, but they often do not. The market is heavily distorted by uncertainty, a half-baked regulatory environment, and far too many scams. Which is why you get days like yesterday.
The Ripple to USD exchange rate fell 7.12% to $0.250766, while the Ripple to Bitcoin exchange rate fell to 0.00005209 BTC.
If a price drop of this magnitude occurred in the stock market, investors would be asking some very serious questions. But in the cryptocurrency market, this kind of volatility is normal.
How do we know that? Well, because the cryptocurrency blogosphere remained poised after yesterday’s fall. Most of them can see what’s happening—partly because it’s not rocket science.
BTC dominance—Bitcoin’s share in market cap—remained under 50% as altcoins grew in prominence. However, confidence surrounding Bitcoin’s upcoming hard fork is leading to a minor rally in BTC prices, thus inspiring a rotation of altcoin funds into the market leader.
As a result, BTC dominance is up to 52.2% for the first time since May.
It’s possible that increased concentration is the result of a sell-off at the margins of the altcoin world, but that’s not what happened here. We know this because as XRP prices bent downward, two things happened:
- The cryptocurrency market cap went up to $152.57 billion.
- Bitcoin prices went up to $4,823.19.
Let me say that again: There was an increase in the overall market cap for cryptocurrencies, revealing that investors remained bullish on the entire sector. In other words, this wasn’t a random sell-off that left Bitcoin untouched. It was a bullish trend that featured enthusiasm for Bitcoin.
This may sound like a distinction without a difference, but it will be incredibly important down the road. Here’s why.
A temporary rotation from XRP to Bitcoin is exactly that—temporary. Traders are trying to extract gains Bitcoin’s pre-fork surge, which is exactly what they should be doing. Does that imperil our 2017 Ripple price prediction? Absolutely not.