Bitcoin is known to be deflationary in nature, but the same is not true for altcoins.
The maximum number of BTC in circulation can never exceed 21 million units and so far almost 90% of them have already been issued.
Bitcoin’s unchallenged lead among the altcoins
The same cannot be said for altcoins, due both to the fact that not all cryptocurrencies are deflationary in nature and that their continued rise means that more and more individual units are in circulation.
The question often arises as to whether this phenomenon could generate a kind of overall inflation of the total cryptocurrency money supply that would eventually undermine the deflationary nature of Bitcoin.
This question has been asked for years, and in all that time, while there has been an incredible increase in the number of individual token units in circulation, the price of BTC never seems to have been affected.
Probably the key point here is the absolute uniqueness of Bitcoin.
BTC is to date the only cryptocurrency considered to be a hedge risk-on against inflation, with no other token or cryptocurrency ever being able to not only oust it but even try.
Bitcoin’s role as a hedge risk-on against inflation has never been challenged by any altcoin, so much so that to this day no altcoin is considered as such by investors.
Bitcoin vs Ethereum
The only crypto that could come close in some ways is ETH, especially considering the latest update that initiated the burn of some gas, but its monetary policy is far from guaranteed as it has already changed many times in the course of its history while Bitcoin’s has never changed at all.
Even ETH is not considered a hedge risk-on against inflation, but is regarded as the utility token of the now immense Ethereum network.
However, this reasoning would not be complete without also considering the risk that some altcoins might compete with Bitcoin on a technical level.
On a technical level, cryptocurrencies have already been created that outperform Bitcoin, although the Lightning Network holds its own in this respect, but this has not affected BTC’s dominance in the slightest.
So what is the reason for Bitcoin’s dominance?
There are probably two reasons.
First, Bitcoin’s main winning feature is not performance, but its resilience combined with true decentralization.
Many altcoins that perform better than Bitcoin from a technical point of view are not particularly decentralized, or have not yet shown the incredible resilience that Bitcoin has shown in its twelve years on the market.
Secondly, many altcoins are not even meant to be Bitcoin’s competitors, i.e. they are not meant to be risk-on hedges against inflation at all, but technologies that do something else.
Ethereum has demonstrated with NFTs that it can do very well something that Bitcoin was not even designed to do, to the extent that it is now clear that ETH does not really compete with BTC, and vice versa.
Litecoin, Bitcoin Cash and SV
All cryptocurrencies created to challenge Bitcoin, from LTC to BCH or BSV, have ended up losing the competition against the first and most important cryptocurrency ever created.
This is because Bitcoin’s strength over time has become such that it is almost impossible to imagine that any other project could surpass it in this respect.
Lately Dogecoin has also been trying to offer itself as an alternative to Bitcoin as a means of payment, but in the end, thanks to the Lightning Network, it is Bitcoin that has been challenging Dogecoin.
The proliferation of altcoins not only does not seem to harm Bitcoin, it seems to almost strengthen it, because the more the use cases of cryptocurrencies expand, the more the crypto markets grow.
And since the crypto markets are literally dominated by BTC, as well as ETH and to some extent BNB, the wider the use cases of cryptocurrencies eventually means that Bitcoin will become more widespread.
Only if a real and powerful competitor to Bitcoin were to emerge among the altcoins could this be affected, but so far the dozens, if not hundreds, of projects that have tried have all failed miserably.
As of today there is no altcoin on the horizon that can really compete with BTC, not even ETH which is having a lot of success, but not as a competitor to Bitcoin.