What The April Recovery Is Telling Us
If you were a depressed crypto investor, you have to love the month of April. So far the market for coins, tokens and just about anything associated with digital currencies has treated us all well. To someone who witnessed the dotcom bubble burst, the crypto price rebound is telling us a lot about how to invest for the period ahead.
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In early 2000, the tech heavy Nasdaq topped out around 3950 before collapsing, it took nearly 10 years before prices fully recovered. That is because many of the companies whose equity inflated the Nasdaq in 2000 simply disappeared. Investors were duped by false hopes coming from Wall Street. This time around there is a big difference.
Mining The Data
The performance of cryptocurrencies over the past few weeks yields some eye popping insights:
1.) Even the worst performing crypto (+29%) out performed the Nasdaq (+5.3%)
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2.) The biggest winners are the newly minted Gen III companies (+90%)
3.) Of the dozen largest cryptos, bitcoin turned the worst performance (+29%)
Here is how we got to these conclusions. We looked at the 12 largest cryptos, measuring their price performance starting on April 1 until the time of this writing. We put Bitcoin into the category of Gen I, Ether and Litecoin into Gen II. The remaining were put in Gen III.
Here is how things shake out:
Gen I: 29%
Gen II: 60%
Gen III: 90%
The most obvious conclusion: investors are overwhelmingly being drawn to Gen III companies. So what is this telling us? The answer is that investors no longer view the crypto market as consisting of just Bitcoin. That has seismic implications that can only be seen in one way. Investors are telling us that they believe these newer cryptos are coming are a genuine threat to solving one of Bitcoin’s key issues: scaling.
Some of the scaling solutions promised by Ethereum and Litecoin show up more favorably in April’s price performance but still take a back seat to solutions offered by names like IOTA (+97%), Stellar Lumens (+95%) or EOS (+78%). It greatly helps that Ethereum benefits by having their platform used by more than 80% of the ICOs that now fill the list of Gen III members.
Keeping It Real
The are two obvious flaws when interpreting all this information. We are using less than a month of data and that is precious little time to declare a tectonic change. Also, we left out the performance of Ripple (+83%). In reality XMR fits alongside bitcoin. But it doesn’t change the fact that the biggest cap crypto and the one most synonymous with digital currencies has been a conspicuous laggard in the April crypto revival.
The key to bitcoin becoming a global alternative currency rests in part on the Lightning Network being capable of processing transactions far faster than the 7-8 per second rate that is the current pace. But the real measure of bitcoin is the number of places where owners can put their BTC to work. Otherwise BTC is nothing more than an investment vehicle.
The claim is the bitcoin is accepted by more than 1,000 merchants including 13 major retailers accept BTC. This includes names like MicroSoft, Overstock and Whole Foods. The list is still missing more than 95% of America and it is still unclear how much volume is transacted by the entire list of existing merchants. Most likely it is quite limited.
The Case For Gen IV
This is not to condemn bitcoin to becoming the next Sun Microsystems. The most optimistic expectations for global acceptance was never going to happen overnight. It is just that technology, according to Peter Thiel is a state where every company must disrupt itself before someone else becomes the disruptor. These days the loud disruptive noises are coming from those that make up Gen III.
This is not great news for bitcoin investors counting on Thomas Lee’s prediction for a $25,000 price by year end 2018. But the April price reversal led by Gen III companies gives us a big clue on where the money flows are going and the impressive level of investor sophistication. So far crypto innovation is being led by Gen III. Before long there will be a Gen IV.....https://hacked.com/bitcoin-25000-by-year-end/
