As comparisons to the dotcom bubble rise, the sentiment around cryptocurrency markets mirrors the early-2000s tech frenzy. Companies lacking viable business strategies, despite multi-million dollar valuations, collapsed when that bubble burst.
Cryptocurrency markets are not exempt from this scenario. The majority of the 1,385 coins accessible today are still climbing to multi-billion dollar valuations, although little is known about them. Take Dogecoin, for instance—a digital asset originally created as a satire during the bitcoin surge—currently valued at $1.6 billion. Despite its high market capitalization, the coin lacks a defined application or characteristic to warrant such a valuation.
Despite the challenge, pinpointing potential survivors in cryptocurrency arenas is complex. No dominant currency has gained widespread acceptance or is on the verge of doing so. Even bitcoin, the leading and most valuable cryptocurrency worldwide, struggles with scalability issues, including high transactional costs and network delays.
Jake Brukhman, at the helm of Coinfund—a blockchain consulting and investment entity rooted in Brooklyn—asserts that core factors are absent from current cryptocurrency evaluations.
“Adoption of these cryptocurrencies is a gamble that knowledge and awareness will promote,” Brukhman states. He notes that current cryptocurrency pricing mirrors future-focused perspectives on decentralized networks.
Three focal areas should capture investor interest before they commit to this asset class, according to Christopher Grey, co-founder of CapLinked, a firm specializing in enterprise software.
The first consideration is the experience of the founders and project teams. While the cryptocurrency and blockchain sectors are emerging, they are grounded in established industries. For instance, ethereum’s smart contract tokens connect elements within recognized industries, making experience a crucial factor.
“If a project team member lacks experience in crypto or blockchain, investors should inquire: how does their prior experience qualify them for this project? Have they at least been involved in the same sector?” Grey advises.
Evaluating the terms of offerings is also essential for investors. It’s critical to analyze the funds raised and the share that investors receive. Traditional metrics applied to stock markets don’t fit this context since cryptocurrency markets invert ordinary market models, where funding might be sought before establishing a customer base or product momentum.
“If the goal is to revolutionize global finance but only $5 million is being raised, there’s a significant discrepancy between intentions and financial support,” Grey explains. Conversely, the clearer a company’s focus, the brighter its future.
Finally, assessing the technology is pivotal. Grey suggests, “If it’s just a concept in a white paper without any development, your faith rests solely on the team. If so, that team better be exemplary. If they’ve created a product, how does it function?”
There’s a note of caution in this evaluation. According to Brukhman, cryptocurrencies are among the least captivating applications of blockchain. “We lack a comprehensive understanding of how cryptocurrencies might reconfigure markets,” he adds.
A reliable starting point is the top 20 most-traded cryptocurrencies. When and if a market crash occurs, spotting notable survivors within this list should be feasible. Bitcoin—the pioneer of cryptocurrencies—is swiftly establishing itself as a value reservoir. Its blockchain and code foundation have given rise to derivatives like Litecoin and Bitcoin Cash, which aim to become the favored daily transaction cryptocurrency. Ethereum’s realm of decentralized applications, or Dapps, is rapidly gaining momentum and nurturing a wide range of tokens, such as Populous, stemming from its infrastructure.
Other cryptocurrencies, including Dash, have claimed similar stakes and have cultivated niches in burgeoning markets such as Zimbabwe and advanced economies like Spain. NEO might emerge as an unexpected contender, targeting the smart economy and collaborating closely with the Chinese government to foster the cryptocurrency ecosystem domestically. Additionally, it has announced a strategic alliance with Microsoft China and has engaged with entities like Japan’s Ministry of Economy.
As we proceed down the roster, we encounter cryptocurrencies demanding greater risk tolerance from investors. Take TRON, for example—a currency that has recently surged but lacks a ready product, and its founder possesses limited experience. Furthermore, various use cases for its coin have been announced, spanning the Internet of Things to online payments and business logic for government legislation. However, the startup displays scarce evidence of partnerships or expertise in these areas.
Engaging in cryptocurrency investments and Initial Coin Offerings (ICOs) is fraught with risk and speculative by nature. This article does not serve as an investment endorsement by the writer or platform. Since each individual’s circumstances are distinct, consulting a qualified professional before making financial decisions is essential. Neither the writer nor the platform guarantee the accuracy or timeliness of the information herein. The author holds modest amounts of bitcoin, bitcoin cash, and ether as of the article’s publication date, with uncertainty regarding ownership of other bitcoin variants.
