Bitcoin has had a meteoric rise, peaking at over US$20,000 – and a heart-sickening though widely-predicted fall, closing at $6,487.70 as of 24 October, according to data from Coinmarketcap.com.
The market for bitcoin seems to have leveled off substantially, and though there’s been some interim volatility, things have been quiet since last summer, and nearly flat since early September.
Yet more crypto assets – competing with bitcoin for limited capital allocation to crypto – seem to be coming online on a nearly daily basis. So far, there are more than 1,600 distinct cryptocurrencies in existence today.
So if you aren’t happy with bitcoin, you have a lot of other alternatives within the crypto asset universe.
Furthermore, the constant supply of new crypto assets would seem to put a damper on future bitcoin demand. Now that bitcoin’s biggest and most obnoxious bulls from the heady days of 2017 have been taken down a peg or two by the rapid selloff early in the year, the market has finally developed at least a modicum of respect for risk.
It’s an important part of growing up.
But even as the realities of the market was popping the egos of the bitcoin fanatics and driving their assets from $20,000 to $6,600 within a matter of weeks early this year, the market absolutely slaughtered a lot of lesser-known cryptocurrencies. Bitcoin was slashed. But at least 800 cryptocurrencies are now dead in the water, worth less than a penny.
Some of them were just bad ideas. A few were outright scams, designed to lure in suckers just wanting to get in on the craze, but who weren’t willing to go through any kind of due diligence process on the currency founders or backers or even the basic rationale for the currency’s existence. One scam alone – an initial coin offering (ICO) called Gizo, cost investors an estimated $2 million when the founders simply walked away with their investors’ money.
But a few have done very well for those with the foresight or luck to get involved in the early stages. EOS didn’t even exist before July of 2017, and if you got in a year ago, in late October of 2017, you would have bought EOS around US$0.50 each. Today it’s worth more than 10 times that much, currently trading at US$5.37 as of this writing.
This particular currency has promise as a basis for the implementation of smart contracts, and developers took steps to address difficulties in scalability that have been hampering older cryptocurrencies like Ethereum and Bitcoin, according to Coinswitch. It can also reduce or eliminate transaction costs that are involved in most older crypto transactions.
Monero, launched in May, 2014, peaked with Bitcoin in January of 2018 at US$434, but has settled in for the moment at US$109, and it’s been in that neighborhood since June. For those who got involved in the spring of 2017, when Monero was trading around $20, they did very well indeed.
For both of these currencies, the key has been to get involved before the hype, and don’t succumb to the urge to buy in when the bulls are running, the amateurs are bragging, and when digital currencies are grabbing all the headlines on the investing talk shows.
In Monero’s case, the currency also had a competitive advantage and a reason for existing that set it apart from other crypto-currencies: The blockchain it was built on is designed to support anonymity. Yes, the blockchain records transactions, but effectively encrypts them to make them all but untraceable to government officials and anyone else who might want to track its users down.
The anonymity could also come in useful to corporations and investment companies who might want to commit to transactions in a way that their competitors can’t discern what they’re up to, or to anyone doing business abroad in a foreign country with reasons to fear government interference.
Monero got another boost late last year when a number of prominent recording artists, including people like Dolly Parton, Marilyn Manson, The B-52s and Motley Crüe, announced they would be accepting Monero as payment and even providing discounts on merchandise for Monero transactions.
Monero transactions are considered to be more private than Bitcoin, and transactions tend to close faster.
Unlike many cryptos, IOTAs developers aren’t anonymous. It was created by David Sønstebø, Sergey Ivancheglo, Dominik Schiener, and Dr. Serguei Popov. It’s a young one, which started trading in June of 2017. It was developed to be a low-to-no friction currency supported by devices in the so-called “Internet of Things.” (IOT = “Internet of Things,” get it?)
Its key advantages: No transaction costs (hence the term “no-friction,” the capacity for offline transactions, and again, unlike bitcoin and Ethereum, infinite scalability.
Investors piled in after reports surfaced that IOTA’s developers had struck a partnership deal with Microsoft. But those reports were wrong, and no such partnership existed. So speculators trying to climb on the bandwagon got stung as prices corrected. And they certainly got stung if they bought in at the speculative peak of the cryptocurrency craze.
But the currency still has promise as the Internet of Things becomes more and more a daily part of our lives.
So unlike many of the 800+ currencies that essentially collapsed to the point of worthlessness over the past few years, Monero, EOS and IOTA actually had some competitive advantages and – critically for any currency – a base of people willing to accept it for goods and services.
All currencies are a matter of faith, after all.
Does this mean these three currencies will appreciate from here? Nobody knows. Those interested in speculating in any cryptocurrencies should carefully assess the unique competitive and practical advantages of any crypto asset, the background and reliability of developers and promoters, security considerations, and perhaps above all else, market sentiment, before getting in.