I see a comparison with domain names
BTC is .com
LTC is .net or .org
All the other alt coins are the other new shitty extensions
Due to marketing and network effect, .com remains king despite the infinite number of new extensions
However if .com was the only domain extension, its value would be infinite (like some believe BTC will become)
But because of all the extensions, its value is capped
So to answer OP's question: 1000 altcoins is the same as 10 altcoins, crypto capitalization will be shared between the most popular altcoins depending on hype. Every new altcoin that brings technological innovation and hype will get a share of the crypto cake, but mostly they will get a share of the ALT cake as long as Bitcoin developpers stay on top of their game.
Altcoins that only bring hype and no technological innovation (feathercoin, etc) will get dumped on the long term.
If you notice an altcoin with a good developping team, expect a quick change in value and possibly a transfer of capitalization from BTC.