It has been while since I updated about Bitcoin and others.
It’s helpful to compare crypto-currencies relative to Bitcoin (BTC) than the U.S. Dollar.
If BTC falls to $2k or less, then pretty much all the alts will become worthless. End of story.
In the extremely unlikely even Bitcoin gets to $15k or higher, alt coins will likely outperform, but not all will. Ethereum will likely not.
The problem with Bitcoin is the psychology has changed 180 degrees from last year. The price momentum is gone. The funds and retail investors that bid-up Bitcoin in 2017 and early 2018 are unlikely to return. That’s why the price sometimes pops, only to crash again. No one wants to hold this for long.
For Bitcoin to go up, requires large instantaneous buy orders in order to clear the ‘ask’ side of the book. In the absence of such orders, it is stuck in a narrow range.
So in the 2-5% or so chance Bitcoin somehow is able to get to $15k or higher, which alt coin to buy? There are hundreds of them and it is impossible to analyze all of them. But my favorites are:
Monero
Ripple
Nano
Stellar Lumens
These and Bitcoin are hedged by being short Ethereum, as I will explain.
Ethereum is terrible
What about Ethereum (ETH), which is presently the #2 currency by marketcap. Ethereum has been done-in by an inherently flawed concept, too much inflation and supply, and inability to release promised upgrades. ETH is burdened by ICO selling and too much overhead supply from early investors and mining inflation. The management is so inept that they cannot even get the Constantinople fork to work, even after a year of planning for it. This means that Ethereum has a 7% annual inflation rate, which is 2x more than most other coins. The trading volume is very high yet there is no price support, so there is more volatility for Ethereum than probably any other coin in existence. A 1% decline in Bitcoin means a 5% decline in ETH usually, so one can make easy money by merely going long bitcoin and shorting some ETH, and when Bitcoin recovers ETH does not. ETH, I think, is doomed and have initiated a short position against it while hedging by being long Bitcoin other currencies.
A lot of Ethereum investors gush about the so-called Ethereum ‘platform’, which enables developers to create tokens and fund ICOs using Ethereum’s technology. However, use of the platform does not in any way benefit holders of Ethereum. Ethereum that is bought on the way up is sold on the way down as ICOs sell their stake, so the whole thing is zero sum. The platform can be likened to Linux, HTML, PHP, or JavaScript–yeah a lot of websites, applications, and people use those things, but they don’t in anyway generate revenues, because there is no intellectual property (IP) or ways to extract fees from users. Saying that a lot of applications are built on Ethereum is like saying that a lot of websites are built on HTML, PHP, and JavaScript. This is true, but no one got rich or is getting rich from PHP, HTML, or JavaScript. Apple and Microsoft’s platforms have IP and generate revenues for investors of those companies.
The ETH short can be initiated using Bitmex or other platforms that allow shorting.
All crypto currencies have this IP problem. Because everything is opensource, there is nothing to stop developers from copying, and existing holders do not in any way benefit from market share dilution. Although the vast majority of projects fail, some are successful and money that goes into successful projects potentially takes money away that would otherwise go into Bitcoin, because the same amount of money must be divided among hundreds of coins. With Ethereum especially all you have is a crappy $20 billion open-source platform, which given the reasons above, is obviously unsustainable being worth so much.