Altcoins Are Responsible For Bringing Down the Value of Bitcoin (BTC) Claims Federal Reserve Bank of St. Louis

Recently, the Federal Reserve Bank of St. Louis published an article about the world’s largest digital currency. In the article, the bank said that the value of Bitcoin (BTC) has three potential futures. The three potential futures are zero, infinite appreciation, indefinite, or somewhere in between. However, the bank believes the potential future of the digital currency will be somewhere in between.

The Federal Reserve Blames Altcoins for the Downfall of Bitcoin (BTC)

Andrew Spewak and David Andolfatto – the authors of the article – said that the ever-expanding supply of alternative coins is one of the major factors why Bitcoin is declining drastically. After all, demand determines value.

The market has seen the launch of other digital currencies with properties that are more attractive. If Bitcoin (BTC) was still the only digital currency, something that happened only for a short period of time, all the funds channeled to altcoins would probably go into BTC.

Nevertheless, the argument of Bitcoin (BTC) maximalist that the digital currency will usurp every enhancement by other digital currencies has never come to fruition. The blockchain of Bitcoin even has fewer decentralized apps (Dapps) and Dapp users than other projects that emerged much later such as Tron.

Complicating Factors to the Value of Bitcoin (BTC)

The value of Bitcoin (BTC) has two other complicating factors. On one side, Bitcoin (BTC) is the digital currency with superior quality. As such, it is the off-ramp and on-ramp for several other digital currencies. Initially, Initial Coin Offerings were basically conducted for Bitcoin (BTC). However, Ethereum now carries out the same function.

Initial Coin Offerings (ICOs) increased demand for Ethereum (ETH) through 2017 and 2018. The supply of Ethereum is very high, and it might never stop producing new units.

An aspect of the article states, “Consider now the bearish case of Bitcoin (BTC). This outlook is based on the view that the digital currency has no fundamental value and sooner or later, the market will recognize this fact. In our opinion, one can accept that Bitcoin trades above its fundamental value without claiming that its fundamental value is zero. In fact, a lot of securities trade above what might be considered their fundamental value. Gold, for instance, trades above its value as measured by its industrial applications.

As noted earlier, the actual use of Bitcoin (BTC) is a secure digital store of value and transfer of the same. The blockchain aspect of digital currency has been taken and dominated by other blockchain products. Irrespective of the global chaos, demand for cryptographically secure payment systems is not popping.

However, it is obvious that people will encounter blockchain technologies through banking applications and other decentralized apps. Things like this will increase demand for digital currencies that underpin those blockchains. Digital currencies such as NEO, Tron (TRX), and Ethereum (ETH) have a long-term technical proposition that Bitcoin (BTC) has been lagging on for a long time.

Bitcoin (BTC) Price Today – BTC / USD

NamePrice24H %
bitcoin
Bitcoin(BTC)
$0.00-0.15%

At the time of writing, Bitcoin (BTC) is trading at $3,614 after an increase of less than one percent over the past twenty-four hours. The current market cap of the digital currency is $63.17 billion and its trading volume over the past twenty-four hours is $3.08 billion.

Brian Lubin is a Crypto News Reporter for Smartereum. He's well-known for his reports on the crypto markets.

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