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Why are shanzhai coins not following bitcoin in this bull market?

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Shanzhai currency out of the independent market?

According to Blockbeats, since September 2020, Bitcoin has broken through the $10,000 mark, and since then it has risen to new highs repeatedly, exceeding $40,000. However, many users are finding that, unlike the bull market of 2017, this time it's more like a separate Bitcoin and Ethereum orgy.

In 2017, shanzhai coins were more like appendages to Bitcoin. Once the price of Bitcoin rose to new highs, investors poured money into shanzhai projects, which meant that shanzhai coins didn't have much independence. Moreover, after Bitcoin's short-term peak, shanzhai coins rebounded as investment flowed in and out more quickly. In 2021, however, things have changed.

First, Ethereum was the first to launch ETH 2.0, and the price went straight to $1300, so the rising market cap and high OI in ETH futures caused the Ethereum led shitcoins to rebound in price. Most of the top 10 shanzhai coins have seen double-digit gains, according to CoinMarketCap. The rise of these shanzhai coins has little to do with the rise in the price and timing of bitcoin. In the last two quarters of 2020, the correlation between shanzhai coins and bitcoin declined, but the price of most tokens continued to rise. Call this behavior irrational, or independent of Bitcoin, and these copycats are unlike anything we've seen so far.

The Defi project has changed a lot in this shanzhai market, with high investment traffic reaching 301,700 BTC. Although Defi's Bitcoin TVL has been falling, the Defi project's gains have nothing to do with the rising price of Bitcoin. The reported earnings of high-quality shanzhai programs have changed the portfolios of retail traders over the past quarter.

Bitcoin's dominance has risen to 68 per cent and is likely to rise to 70 per cent or more in the future. Bitcoin's growing dominance poses a threat to the flow of shanzhai investment before the shanzhai investment season comes to a sudden halt. The correlation between head copycats and bitcoin has fallen since the price of bitcoin rose, and the correlation over the past seven days is shown below:

According to CoinMarketCap, the top 10 shanzhai coins have a much higher correlation with Bitcoin. With higher returns and increased correlation, however, they are also trading almost independently of Bitcoin at the moment, which is completely different from 2017.

The reason may be that 2017 was the first year that cryptocurrencies attracted global attention, with many new users flooding in, and the rise of IC0 also contributed to the shitecoin market at that time. Users in FOMO state almost no longer analyze the pros and cons of the project. Once bitcoin rises to a certain level, then users will use the money to buy other shanzhai coins in the hope of higher returns. This has led to a very strong correlation between Bitcoin and copycat coins.

However, the bull market in 2020 was dominated by institutions. Since the big market on March 12, 2020 almost cleared leveraged investors' funds, retail investors needed longer to accumulate capital. Moreover, this bull market did not attract enough retail investors to pour in. In addition, after the development of the Top10 shanzhai coins over the past few years, investors have got to know about them and are basically no longer at the stage of blind investment, which makes investors more cautious in capital allocation. In the end, the new projects are performing better, and several high-quality new projects have been launched and developed since 2019, which makes investors' capital allocation slightly more diversified than before.