Many altcoins have reached all-time lows, with some losing 99 percent of their value from their all-time highs.
Dragonchain, QTUM, SelfKey, and countless others have never had a lower price.
Ever.
Looking at my twitter feed and chat groups, despair has set in. While bitcoin maximalists crow about their safe-haven asset and taunt altcoin bag-holders, those bag-holders respond with nothing.
Capitulation.
Those not in despair have taken to self-deprecation:
If you only care about selling your cryptocurrency for more than you bought it for, you may feel the same way.
Truth hurts
According to CoinMarketCap, only 82 altcoins have more than $1 million worth of daily trading volume on the day of this post.
That equals 3 percent of the 2,440 altcoins listed.
Including fake trading.
Certainly, that data doesn’t include actual usage of altcoin blockchains themselves, it only measures how much money goes in and out of an altcoin on any given day.
And it also includes some data that probably isn’t correct. For example, USDT daily volume that’s four times higher than its total supply (meaning every tether gets bought and sold four times in one day, which seems a bit of a stretch).
Still, it’s the best data I can find, and it offers some perspective on market activity and enthusiasm.
Not many altcoins have much interest from people who don’t already use them. With the overall market tanking, it’s tough to get prices to rise when new demand doesn’t exist.
Also, the people who use those altcoins don’t use them much. Looking at all dApp information sites, none report more than 1 million people using dApps in any 24-hour period. In fact, most dApps have fewer than 1,000 active daily users.
While a handful alts have actual usage that you will never see reflected in trading data, that usage doesn’t matter to you if you only want to sell your altcoins for more than you bought them for. You need to see a lot of people trying to buy those tokens, pining to get into those networks.
You gain nothing from people sending tokens to each other.
Not as bad as you think
Without naming names, I know of several Reddit feeds full of people holding altcoin bags for projects that have disbanded and cryptos that have essentially lost their developer communities.
Also, some coins have better competitors or no reason to exist, yet still see some amount of trading.
When you include all those altcoins along with the ones that have actual developers, novel technology, and practical usage, it makes the entire altcoin scene seem like it’s sagging.
Once you split out legit projects from the rest of the bunch, the picture doesn’t look as bad. Check out some of these 2019 returns as of today (excludes their max during the so-called altcoin bear market):
- Enjin – 2x
- Chainlink – 8x
- Zcoin – 1.5x
- Ethereum – 1.5x
- DASH – 1.5x
- Basic Attention Token – 1.5x
- WAX – 1.5x
Cherry-picking, I know, but some these coins hit 1,500 percent gains at some point earlier this year. Even bottom-feeders like BAT and WAX have seen 50 percent gains.
Compared to bitcoin’s near-tripling, those returns seem terrible. You could’ve made 3 times your money with bitcoin!
Compared to the S&P 500’s 15 percent gains, they seem amazing.
Be careful what you wish for
Yes, many altcoins haven’t gone up, or they’ve gone up only a little bit. Zombie coins and discredited projects will likely never rise again. Good projects without hype will not go up for a while.
Why is that a bad thing?
Would you rather see STEEM go back to $8 and piss everybody off because it still takes a week to get an account, the content sucks, and everybody’s just trying to make a quick buck?
Or would you rather see STEEM go back to $8 as a battle-tested, proven platform with a streamlined onboarding process, long-established communities, and advocates who have invested sweat-equity in building a following?
Bitcoin had 10 years to grow and still needs a global development effort to go beyond speculation and a hedge against financial crisis.
Most altcoins have been around for less than three years and some of the most promising projects are still in development. Many offer compelling alternatives to bitcoin or fill market needs that bitcoin can’t.
Give them time to get ready for the spotlight. Otherwise, people will think they’re garbage.
You will get your altcoin season (and it will be glorious)
In a speculative market like cryptocurrency, you never know which projects will succeed. Also, you always risk a traditional business like IBM or Microsoft will develop a blockchain solution that makes your favorite altcoin obsolete.
Surely, some alts will find success. You can’t have so much innovation and activity without somebody breaking through. Big tech can’t possibly have all the answers, much less develop and deploy them before a nimble upstart gets a foothold in the market.
Eventually, one of two things will happen:
- Some altcoins will gain some amount of adoption.
- Another speculative frenzy will bring a lot of new money into alts.
In both cases, prices will go up a lot.
Ideally, this will come from the first scenario: natural growth, development, and usage of real-world solutions. While many projects will fail, those that succeed will see their tokens go so high, it will not make sense today, it will seem crazy. Ethereum could hit $10,000 and still play very small role in the world’s economy.
But I wouldn’t bet on that outcome, which will take years.
More likely, we will get another mania. Market cycles predict it and Wall Street will probably help make it all happen.
Follow the charts
I won’t pretend to know how to trade cryptocurrency (or any asset). But look at this chart, courtesy of Steve, founder of Crypto Crew University:
According to Steve, this chart shows bitcoin’s dominance hitting resistance. As a result, he expects bitcoin’s dominance to go down to the yellow line at some point, which will lead altcoin prices to go up (relative to bitcoin).
Others have pointed out the same thing. I used Steve’s chart because it seems very simple to follow. Even I can do it!
Follow Wall Street
U.S. regulators have already granted permission for Wall Street to hold its clients’ cryptocurrency. On top of that, they’ve allowed businesses to build cryptocurrency into products and services.
How long until Wall Street makes it easy for your average person to throw a few bucks into an altcoin?
With alts, you have two ways to win: success or speculation.
One or both will happen eventually. You’ll get that altcoin boom—and when it comes, it will make you very, very happy.
Alts will always face downward price pressure
If you think this boom will happen overnight, consider two aspects of many altcoins that people forget about:
- Most projects offer little incentive for people to hold their tokens.
- Developers constantly dilute the value of the circulating supply.
As a result, you always have some downward pressure on prices.
DENT is a great example of both. It has an actual product with real-life users, a genuine use case, and a team that’s executing on its roadmap.
Like most utility tokens, DENT has a big developer fund. Plus, there are no incentives for users to actually keep their money on the platform, except as convenience.
As the development team sells its stash of DENT, distributes airdrops, and gives away tokens to partners, the remaining DENT tokens lose a little value. Additionally, some amount of users will not keep their money tied up in DENT, they will buy DENT only when they need to use the platform, then sell when they’re done with it.
Long-term, this should not matter. If DENT succeeds, the price of a single token will astound you. Maybe as much as $.10 per token, possibly more, and no whale or developer will have enough power to control the prices, except by massive collusion (e.g., OPEC-like cartel for DENT crypto).
Meanwhile, you have to fight through that downward pressure.
Remember the risks nobody’s talking about
One bit of perspective people tend to forget when thinking about altcoins:
Competition is fierce.
Many alts try to solve the same problem. Even if they succeed, any new technology or competitor could pop up to challenge them.
For example, Basic Attention Token has a lot going for it, but will IBM’s decentralized browser kill it?
XRP gets a lot of hype, but banks can create their own private blockchain solution instead of using Ripple’s services. How many banks will do that?
Do we really need a dozen different privacy coins?
Of course, truly decentralized, permissionless networks hold tremendous potential, with network effects that will probably overpower any true challenger. But we’re years away from that, and besides, how many of those networks can out-compete bitcoin?
Keep your expectations realistic.
Could you get a 10,000x return on an alt?
Sure.
But that doesn’t mean you should get upset when your favorite altcoin goes up only 200 percent in six months. Try getting that kind of return in any other market—for a project that could die tomorrow.
If you have any perspective to add, please comment or email mark@markhelfman.com.
Falling knives or perfect timing?
Traders warn me “don’t catch a falling knife,” meaning, never buy anything when the price is going down.
Since I don’t trade, I don’t need to listen to them. I hold relatively few altcoins, use some of them already, and don’t worry about their price dropping. With so much upside, why worry about a few months of downside?
If you’re looking for somebody to confirm the bottom’s in, I wouldn’t do that. Nobody knows when this thing will turn around. Some say it already has—as noted, prices of some good projects have gone up this year.
If you wait for the bottom, you will miss out on your chance to suck up massive gains from new users and investors who will boost the price.
Not to mention, you will miss your chance to accumulate a stake in the best projects while their prices are low. On top of that, if you buy now you will lose less money on projects that fail than if you wait for prices to go up.
Could your altcoins drop another 50 percent? Yes, of course, cryptocurrency is a purely speculative market. Prices do not reflect reality.
The good news is, nobody is pushing the prices up yet.
What are you waiting for?
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Mark Helfman is a cryptocurrency commentator and author of Consensusland, a Readers’ Favorite 5-star book about a country that runs on cryptocurrency. You can also catch him on Medium.
Also published on Medium.