A popular analyst says he’s spotted a telling correlation between a pair of crypto assets and XRP.
Former Adaptive Capital partner Willy Woo says it’s clear that Chainlink (LINK) and Cardano (ADA) tracked XRP’s epic crash last week at a higher correlation than any other cryptocurrencies.
According to Woo, the price movements suggest that traders believe the two projects could one day face regulatory challenges like those of XRP.
“Chainlink and Cardano [are] most closely correlated to XRP.
This is not a full backtrace situation… It’s a two-day trend, meaning traders are lumping regulatory fears of XRP onto those two coins the most.”
Woo says it’s going to be a bumpy ride for the altcoin market in the wake of the SEC’s regulatory action against Ripple.
He says Bitcoin’s emergence as a strong store of value is step one in a long road toward the emergence of a fully fleshed-out crypto ecosystem that includes legitimate altcoin-based platforms.
“…it’s probably a good time to time post a thread about the future of altcoins. And where its place may be in crypto-cap dominance.
Store of value buckets (very roughly):
$12 Trillion Gold
$90 Trillion Fiat
$100 Trillion Stocks
$100 Trillion Bonds
$250 Trillion Real Estate
Derivatives = $1000 Trillion+
Derivatives encapsulates the buying, selling and transmission of risk. The modern world is enabled by them.
Want insurance for your house? Do you want food that farmers will grow? How about funding for your first business? Derivatives enable the risk market to enable these activities for you. They use collateral in the form of store of value to operate.
Decentralized finance (DeFi) in its current form is an experimental area where we figure out how to build networks to buy, sell and transmit risk. For that to happen the underlying networks will need to draw value into their market caps to use as collateral.”
Woo says Bitcoin’s dominance could gradually shift down to one-third of the total market cap of all cryptocurrencies as solid crypto projects emerge and establish themselves over time.
“In the traditional world it’s a 2:1 ratio between derivatives and store of value. That would translate to a BTC dominance of 33%. The first thing to build is store of value, that’s why BTC dominance has been so high. It’s possible it continues a downtrend towards 33%.
We’re currently in a phase of weeding out scams, ponzis and security frauds from legitimate experiments. The ride will be choppy.”
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