Are there too many cryptocurrencies?

The cryptocurrency industry has grown at a staggering pace. There are now almost 21,000 different coins in existence, across a variety of subsectors. From metaverses to decentralized finance, investors are spoiled for choice.

But a burning question, especially among crypto skeptics, is this: Are there too many cryptocurrencies? We’ve repeatedly seen how new altcoins can be created in the blink of an eye. Tokens popped up hours after Will Smith slapped Chris Rock at the Oscars — pumping and dumping on low liquidity. And following the death of Queen Elizabeth, the markets were flooded by a flurry of “memecoins” bearing her name. Some critics felt this was in poor taste and argued it was “a bad look for crypto.” 

Despite the proliferation of thousands of cryptocurrencies — some with names inspired by major coins — Bitcoin and Ethereum continue to dominate. Combined, the valuations of these two digital assets command a 58.2% share of the entire market. All of this leaves altcoins battling for a much smaller piece of the pie.

Is choice a good thing? 

Let’s begin by discussing the arguments in favor of this overwhelming assortment of cryptocurrencies.

While Bitcoin and Ether are universally recognized and accepted, it’s fair to say that many blockchains and crypto projects would prefer to have their own tokens. In some cases, it’s a necessity too — football fan tokens wouldn’t make sense unless the likes of Manchester City and Paris Saint-Germain were able to offer their own digital assets.

Stablecoins are another group of cryptocurrencies where a variety of options is important. While assets pegged to the U.S. dollar dominate the landscape, some investors prefer to use stablecoins denominated in their local fiat currency, such as euro or pound. And given how some stablecoin issuers have faced uncomfortable questions about whether the coins in circulation are properly backed by hard currency in reserve, the variety on offer empowers investors with the ability to…