Ethereum: Your Top Spot Is A Trading Pair Away

Bitcoin is the greatest innovation in crypto.

Without Bitcoin, we wouldn't have this website, we wouldn't have this amazing community focused on disrupting countless corrupt industries, and Ethereum probably wouldn't have yet been conceived in the mind of the genius who created it.

There are many projects out there that are "better" than Bitcoin, but it remains the undisputed king.

Why?

There are many reasons Bitcoin has such a dominance in the market. It was the first, and the community that was built around its innovation knows what it can do. A very large amount of the general public knows about it (even if they aren't using it). It has been used as the major currency for crowdfunding, with many projects only accepting Bitcoin as an initial investment.

I could go on, but I think the major reason it remains so dominant is its presence as a trading pair.

While you can currently buy a select few number of currencies using a fiat pair, most currencies are traded primarily against another crypto currency. In some cases, this could only be Ether, or you might get to choose among a variety of coins, some being more legitimate than others (I'm looking at you, Dogecoin).

However, a very large amount of coins are traded only against Bitcoin. Under circumstances where a trader is given the opportunity to trade among multiple currencies, there is almost always more volume on the BTC pairing, and it is often the only trading pair that gets much attention at all. If a trader is looking to buy a coin, and they want to fill a sell order, they can often find a cheaper price using the BTC pair. Sure, the trader could place a bid on the low volume ETH or LTC pair and hope that their order can get filled at a better rate than they would get via filling a sell order on the BTC pair, but most aren't fond of letting a buy order sit on a low volume pair, having their funds tied up instead of actively trading them. Under the circumstance where the buyer has ETH, they often opt to sell their ETH for BTC in a generally high volume ETH/BTC pairing so they can immediately trade that BTC for whatever coin their heart desires at a better rate, given the higher volume.

Basically, this is like needing to buy tokens to shop at your favorite store, except every store you're interested in shopping at uses the same token, so you are either holding a bunch of those coins to buy things you want, or you are constantly buying new tokens every time you shop. No matter how you do it, there's going to be a lot of volume and buying of these tokens. Add in that these tokens are (almost) always going up in value, and you're going to have a lot of people wanting to grab as much as they can.

Of course, if every coin is traded against the almighty Bitcoin, when Bitcoin goes up, so does everything else.

When Bitcoin goes down, so does everything else.

One could imagine when there is a bear market, this can be very bad for altcoins. If Bitcoin drops 50%, it is pretty likely that most coins associated with it will fall about the same amount. Even worse, when there is bad news surrounding Bitcoin and its survival, many dump their altcoins price relative to Bitcoin as well, considering most coins' chance of survival is much lower than the well-known Bitcoin.

You can see how this can be problematic. While many coins can outperform Bitcoin in a bull run because they receive the price bump from Bitcoin rising as well as price increases because of their own developments, they also see larger price decreases during bear markets or downtrends.

Ultimately, every altcoin is almost like a magnified version of Bitcoin, even if the altcoin has almost nothing to do with Bitcoin. These coins shouldn't fall because the news has a negative article on Bitcoin, and they shouldn't rise just because they are in the same category. They should be more independent.

I would love to have all of the coins have prices that reflect what is going on in the project, but that is pretty unrealistic when fiat pairings are relatively uncommon. However, I think there is a trading pair that makes a little more sense.

What if we traded erc20 tokens (coins using the Ethereum network, of which MANY coins out there are) against Ether?

Okay, we have things like EtherDelta, or ForkDelta these days, other decentralized exchanges, and some lower volume ETH trading pairs. However, most of these don't get too much attention, and unless a coin is traded exclusively on these exchanges where there are no BTC pairings, BTC price swings will still have a large effect.

Even worse, when ETH is so dependent on BTC, even if a coin was traded exclusively against ETH, the price would still fall when BTC falls.

I would like to give an example that shows how ingrained this mentality is. I started using Abra as a Coinbase alternative a few weeks ago. It seemed awesome: I could trade USD (bought with a credit card, take the CB!) with many different currencies. However, I would still have to exchange whatever coin I had to either BTC or USD to withdraw anything. If you're like me, you never cash out your crypto, so wanting to trade could be problematic if you want to avoid trading for BTC.

Ultimately, it seems like you can't really escape Bitcoin's absolute dominance on anything you buy in crypto.

However, if Bitcoin just withered away for whatever reason, I think other coins could still survive. That being said, Ethereum is pretty dang important for any erc20 token, and would therefore make a lot more sense to trade those tokens PRIMARILY against ETH. If Ethereum has good or bad news, those tokens SHOULD go up or down in value because of that, right? If the Ethereum network becomes very slow and expensive, this would be bad for the token. If Ethereum makes improvements, like solving scalability issues, this would be good for the token.

For all those other coins out there that are utilized on their own network, I think they should be able to have a price that is more independent as well. However, I think it is much more realistic to expect that the second largest coin can gain a little more independence, especially considering its importance to so many projects out there.

What's the take home message?

Push for more USD pairings that aren't dependent on BTC, push for more pairings with higher popularity altcoins on exchanges, and maybe put some fair orders up on a pairing that isn't involved with Bitcoin so people might actually use that pairing.

As you can probably tell, I think Ether is the most important coin in crypo right now (trading pairs aside) and I would love to give it a proper valuation and independence from the (current) king.

Hopefully, we can one day see value and price have a more accurate correlation in the world of crypto.