The cryptocurrency market as a whole is worth somewhere around $275 billion. So today, in June 2019, it’s more or less on the same level as November 2017, as it was ending. So the market has been going from one point to basically the same location, but the road has been very long and hard. The greatest boom happened exactly as November 2017 ended and, then, during 2018, we saw the market lose about 85% of its total value in a protracted bearish run that affected every blockchain project in the planet.
Dot com and crypto
The vast volatility we see in the cryptocurrency market is typical of emerging industries and economic activities. The internet economy behaved similarly. The stocks rose by 50 times between 1997 and 2000 only to crash down at the tune of 95%, reaching their historic low in September 2002.
As the year’s end saw the industry recover some of its value, too many investors were left too afraid of facing further losses and didn’t want to join back in the action. In the end, thigs stabilized, many companies disappeared, but those who picked the right assets – Amazon, for instance, or Google – were able to negotiate all the previous red numbers and even make a handsome profit.
So while there are definite similarities, there are also some critical differences between the dot com boom and the cryptocurrency market. In the dot com fiasco, failing companies went bankrupt, liquidated, and disappeared. The cryptosphere is not like that. There is not such a clear line that tells you (and the market) when a project has failed already.
So, in the crypto verse pets dot com is still around. Maybe nobody is maintaining the blockchain’s network or code. Perhaps it only keeps a handful of active users (there are romantic optimists everywhere). And that small number of idealistic users can keep “alive” in the market a cryptocurrency that’s dead by any other meaningful standard. But we still have no mechanism that can let us know what those projects are. Even worse is the fact that all projects start like that too. Bitcoin too was like that in the beginning.
So achieving some stability in the crypto verse would take several ingredients. One of them would be to separate the wheat from the chaff. This allows cryptonauts to find coins that hold great potential and that are still very cheap because their market behavior doesn’t follow BTC as closely as many other currencies.
That matters because a blockchain project can only stay on the top of its game if it can attract enthusiastic developers that bring their talents to the network. That needs uninterrupted momentum. And that momentum and the evidence of strong fundamentals in the developing community attracts more talent, investor capital, and enthusiasm from traders. It’s all about creating a virtuous circle.
Are there any answers?
So how do we find the chaff? We would suggest starting by looking at the coins that made up the top 20% of the market capitalization by November 2017. At that time, everybody was doing well. But some of them negotiated the 2018 crypto winter successfully. Dash, Cardano, Tron, Litecoin, Ethereum, EOS would be examples of this.
They’re dependable in terms of fundamentals, but they’ve failed to capture the investors’ imagination. The market is at the same level of November 2017 right now, but these coins (reliable though they are) are still not at that level. They still have something like 25% to recover if they’re going to reach that goal. So this category is made up of substantial projects that are not in most people’s wish list.
Another bunch of currencies to notice is the group comprised of those that have lost capitalization in Bitcoin terms even in the current 2019 rally. There are about 540 coins in this situation, and some big names are included. NEO, IOTA, Stellar Lumens’ XLM, Ripple’s XRP, and Monero are among the best-known examples.
XLM and XRP’s primary use case is settling international transactions; Monero’s XRP is a currency that seeks to bring privacy and anonymity to the center of the crypto verse; IOTA wants to bring cryptocurrency into the Internet of Things world; NEO is a smart contract platform. So as you can see from this shortened list, we’re talking about solid projects with specific use cases.
So what to make of them? They’re bargains because if they gather momentum, they will become unstoppable. But they’re risky too. Monero, for instance, is unlikely to be tolerated by many of the world’s governments. XLM and XRP are competing with private blockchain projects that are trying to disrupt the same markets but that are developed by banks and work closely together with regulators. It’s not that they’re not good. On the contrary, they’re maybe too good for the mainstream to adopt.
Then we have Bitcoin Cash, Bitcoin Gold, HyperCash, Gold Bits Coin, Metaverse ETP. They were 13% of the market’s worth in November 2017, and they’re not even close to recovering their value (in BTC terms) in the current market. They’ve been down by about 77%, and they don’t show any signs of any meaningful recovery. We would conjecture that mainstream investors, as far as any cryptonaut belongs to a mainstream, gave up on these coins a long time ago.
The next group, which some would consider the real chaff, is comprised of 111 currencies that were at USD 25 billion collectively at their peak but that they’re now under USD 1 billion. There are no recognizable names in this group.
So, we’re left with five cryptocurrencies that accounted for 53% of market cap on that infamous November 2017. They really went up when everything boomed during the next month. They suffered during 2018, but they still kept good value and, now, they’re back with a vengeance.
Are these good investments? Probably not, they could be too high in price all ready to take away profits soon, but they have shown they perform under any set of circumstances. These are the cryptocurrencies for all seasons. So who are they? Bitcoin, EOS, Binance Coin, Basic Attention Coin, and Freicoin. The last two projects may seem out of place as they lack fame but look at their numbers.
Investing in cryptocurrencies can be very profitable and very exciting. But there’s a reason for that. Investments that are so exciting and have such high returns always involve very high risks. Besides, there is still no regulation, and the whole crypto verse could disappear tomorrow (yes, it’s unlikely) if a couple of switches go off in China, where most mining in the world is made.
That being said, it can also happen that cryptocurrencies do find their way into the mainstream economy and become an essential agent with all the same uses that fiat money still has. The cryptocurrency market is at a crossroads, and we won’t know what happened until it’s already too late.
So what to do? First and foremost, you must do your own research. Find out each project’s strengths and trading histories, there are plenty of tools for that. Then make an investment plan and follow it through, don’t let your guts get the best of your head even (especially) when things are looking exceedingly sweet.
Also, diversification matters. Yes, Bitcoin is king. It will remain king. But you make a profit by buying low and selling high, and while that is still possible with BTC (and it will be possible many times again), if you’re going to hit the BTC jackpot, you’ll need to get your timing just right. And that is incredibly difficult.
Last but not least, have your fun as a crypto investor. But always remember that you should only get in with money you can afford to lose.
Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.