“Bitcoin is different from any cryptocurrency”: Fidelity

In a recent report, Fidelity Digital Assets, the digital asset services arm of financial giant Fidelity Investments, stated that “bitcoin (BTC) is fundamentally different from any cryptocurrency.” In the words of this company, all altcoins are modified versions of Bitcoin, the first digital cash network.

This differentiation is based on bitcoin’s solid position as “the most secure, decentralized and solid digital money” compared to cryptocurrencies, indicates the American company.

Those inherent characteristics of bitcoin make it a superior option for those looking for a store of value asset in an increasingly digitalized world.

Despite the wide adoption and dominance of bitcoin in the market, Doubts have arisen among investors about its future compared to newer and emerging altcoins, the company says.

Investor concerns about bitcoin

One of the first concerns investors have regarding bitcoin is that, as the first digital asset, may be vulnerable to innovative destruction by competitors.

Another concern they raise is whether bitcoin offers the same potential reward or advantage as some of the newer, smaller digital assets that have emerged, the report notes.

The truth is bitcoin should not be directly compared to other cryptocurrenciessince its main function differs significantly.

“There is not necessarily mutual exclusivity between the success of the Bitcoin network and all other digital asset networks. Rather, the rest of the digital asset ecosystem may meet different needs or solve other problems that bitcoin simply does not solve.”

Fidelity, investment company

At this point it is important to note that These “problems” can often be solved without the need to create a cryptocurrency. In general, altcoins end up being solutions to non-existent or already solved “problems.”

Due to the ease of creating a cryptocurrency, many have been created, but few are relevant or even known. In any case, just because a cryptocurrency is popular at a certain time does not mean that it has solid fundamentals, that it will remain popular over time or that it is a good investment, as pointed out by Criptopedia, the educational section of CriptoNoticias.

The most widespread use today among all cryptocurrencies is speculation, that is, exchange with the aim of generating a future profit. While bitcoin improves money as a whole, both for its use and its creation. Likewise, it allows the user to mobilize their money 24/7/365, in minutes and at a very low cost. In short, it gives the user back control over their money, adding improvements to digital privacy.

The author of the book “The Bitcoin Pattern”, Saifedean Ammous, explained that “good engineering begins with a clear problem and looks for the optimal solution, which not only solves the problem, but also does not contain any irrelevant or superfluous excess.” Thus, he establishes a comparison between BTC and cryptocurrencies.

In this sense, he explains that the creator of Bitcoin (Satoshi Nakamoto) “was motivated by the creation of a ‘peer-to-peer electronic cash’ and designed a solution for that purpose.”

For Ammous, there is no reason to expect bitcoin to be suitable for other functions.

Cryptocurrencies tend to have higher volatility than bitcoin

Altcoins, a category that encompasses all digital assets other than bitcoin, have seen a substantial increase in recent years, both in supply and demand. Fidelity estimates that there are between 9,000 and 20,000 altcoins in the market.

Each altcoin can be grouped into one of several subcategories based on its function: payment tokens, stablecoins, meme cryptocurrencies, utility tokens, and governance tokens.

Among the differences that can be seen, bitcoin exhibits lower volatility compared to other digital assets due to its prominence and greater market liquidity. In the following TradingView graph you can see how bitcoin’s volatility has decreased over the years and this trend is expected to continue.

“Altcoins tend to be more volatile and experience strong price fluctuations influenced by news, technological advances, and changes in investor sentiment,” Fidelity asserts.

While many altcoins have attracted a growing number of followers, there is a possibility that newer and less popular cryptocurrencies failas constantly happens in the market, while bitcoin’s 15-year track record leads one to believe that it will continue to be a successful currency.

Bitcoin’s programmed features make it fundamentally different from any existing altcoin. Bitcoin only shares with cryptocurrencies the fact of being made with cryptography. From the rest, there are only differences.

The most important refers to the fact that Bitcoin is a neutral, open and ownerless network, just like the Internet; while all cryptocurrencies have dictated owners, permissions and purposes, which makes them behave more like companies and their stock market actions.

“Given these differences, some members of the digital asset community believe that no other digital asset is likely to soon surpass bitcoin strictly as a monetary good because it is currently the most secure, decentralized and robust digital money,” the report adds.