Which Cryptocurrency Will Survive?
Which cryptocurrency will dominate?
If there is one cryptocurrency that’s going to dominate the market it’s Bitcoin. There are several good reasons why this could be the case.
Bitcoin gets more support from the traditional financial institution than any other cryptocurrency. A few months ago we saw Paul Tudor Jones lay out his case for going long on Bitcoin. More recently MicroStrategy announced that they had purchased $250 million worth of Bitcoin using their cash reserves.
Even the United States government has come out and said that banks can custody Bitcoin for their clients. There is more “establishment” support for Bitcoin than any other cryptocurrency.
Bitcoin is also gaining traction in emerging markets. Paxful, which is popular in Africa, has seen record levels of peer-to-peer exchange throughout the continent (Nigerians are using Bitcoin to trade with the Chinese).
Bitcoin is also increasingly popular in South America. In the United States, the Square Cash App is one of the most popular ways to buy Bitcoin and the number of people allocating to BTC via the app is skyrocketing.
All of this is taking place against a backdrop that seems to be purpose-made to fit the Bitcoin narrative. In May of 2020, the Bitcoin inflation rate was cut in half. This happened at the same time as central bank money printing was ramping up.
Although using the past tense to describe this money printing is silly, as money printing is ongoing. The Federal Reserve in the United States is injecting trillions of dollars into the system which is encouraging many investors to park their money in scarce assets like Bitcoin.
Bitcoin will dominate because it has the most support from the financial system.
Bitcoin will dominate because it has name recognition.
Bitcoin will dominate because it’s a scarce asset in an era of out of control central banks.
Which altcoins will survive?
Although there are some awesome altcoins, when we look at crypto on a long enough timeline it’s clear that many projects will not succeed.
For smart contracts, we have Ethereum, NEO, Cardano, Tron, Tezos, and many others. At the moment it appears that Ethereum will win the smart contract war, although it’s too early to say for sure.
XRP and XLM are two technically similar coins that are trying to achieve the same thing. XRP hasn’t done great in terms of price or fundamental value, following the SEC starting litigation against the Ripple company for selling unlicensed securities. Therefore, it almost certainly won’t win out over the decentralized XLM, nevermind a Lightning Network enabled Bitcoin.
On the privacy front, we have Grin, Monero, and Zcash, and those are just the most popular privacy coins. Monero has a higher market cap but Zcash has more institutional support so it’s hard to predict what will happen.
In general, the coins that will survive are the ones with the largest budget, a real use case, and a large developer community. At the end of the day though nobody can say for sure which coins will do well and which will be relegated to the dustbin.
Can Ethereum survive
At the moment Ethereum is not only surviving, it’s thriving. Ethereum is the most popular smart contract platform and it has more developers working on the project than any other cryptocurrency in the world. There’s even more Bitcoin locked up in Ethereum than there is locked up on Bitcoin’s Lightning Network.
The real concern for Ethereum is two things.
- Can the Ethereum developer community successfully transition the blockchain to Proof of Stake? It’s a massive undertaking that’s perpetually behind schedule. This has raised some doubts about whether the transition to staking will be successful.
- Can Ethereum scale? Ethereum’s proposed solution to scaling is sharding: splitting the blockchain into 64 parts. While this would massively increase Ethereum’s ability to scale it would also be technically complex and difficult to implement.
The failure of either of these two upgrades, proof of stake and scaling, would hamper Etheruem’s ability to grow which would make it easier for the competition to take over. However, if both of these upgrades happen then there’s no reason Ethereum won’t remain the dominant smart contract platform for decades to come.
Will Cardano survive
The problem for Cardano is that as of August 2020, ADA is a smart contract platform that can’t host smart contracts. The Cardano blockchain is being built in pieces and smart contracts won’t be added until some point in the future.
This lack of functionality puts Cardano at a big disadvantage since it has allowed Ethereum to get a massive head start.
The key for Cardano’s survival will be finding a niche that it can thrive in. That niche, Cardano believes, will be Africa and the Cardano project is promoting blockchain solutions throughout the continent.
If Cardano can catch on in Africa it may do very well for itself. If it can’t find users in Africa then it will be much more difficult for the project to survive. There are many other smart contract platforms competing in the space.
How many Cryptos will survive?
The only correct answer is: who knows? However, an educated guess might be that 1 or 2% of today’s cryptocurrencies will still be around in a decade.
As we saw with the ICO bubble, hundreds (thousands) of projects have no real use case or original technology. Only a small number of projects are compelling enough to survive for the long term.
Which projects will survive remains to be seen though, and at the moment it’s a good idea to diversify a crypto investment into different coins. Crypto users who are excited about different projects can store most of their favorite coins with the Exodus wallet. Exodus currently supports more than 100 crypto assets and new coins are always being added.
Exodus users can also use the wallet to swap between different currencies without having to use a centralized exchange or go through KYC. That’s a big deal since centralized exchanges are always at risk of being hacked and keeping your coins in your wallet is the safest way to secure them.
The thing about Bitcoin is that it’s proven itself over the last decade. The Bitcoin network has a near-perfect uptime and it’s never been meaningfully hacked. This, despite having a market cap in the hundreds of billions.
Bitcoin also has the best name recognition. If someone’s grandmother ever buys crypto it’s probably Bitcoin that she’ll buy first. Bitcoin is likely to see tremendous asset inflows in the next 18 months, making it one of the best cryptocurrencies to own.
One of Bitcoin’s greatest drawbacks is that it’s not (yet) private, anyone can trace transactions and see how much Bitcoin another person is holding in their wallet.
Zcash at least partially solves this problem by giving users the option to transact anonymously. While Zcash is not fully anonymous the way Monero is, Zcash has more institutional support and is less likely to face regulatory pressure in the future.
Ethereum has dozens of different use cases, from collateralized loans to supply chain tracking to no loss lotteries. Combine all of these uses with its impending upgrades and Ethereum is one of the best cryptocurrencies to own.
Although crypto is difficult to value, one of the most useful ways to look at how much a project should be worth is the network effect. Similar to a social network, the more people and organizations which use a network, the more valuable it is. Ethereum is very popular with all sorts of different users and its network is only continuing to grow.
Fastest growing cryptocurrency
Chainlink has been one of the fastest growing cryptocurrencies in the entire ecosystem. More significantly, Chainlink has shown consistent growth over a number of months, it’s not just a pump-and-dump coin.
Is there any hope for Cryptocurrency?
There is absolutely hope for cryptocurrency.
- Smart contracts
- Cross border remittance
- Store of value (hard money monetary policy)
- Private transactions
- Supply chain tracking
- Decentralized identity
And so many other use cases. While there have been plenty of scams, the truth is that the best cryptocurrency projects solve real-world problems and are quickly gaining adoption.
Cryptocurrency is the way of the future. There will certainly be setbacks along the way but the blockchain is never going to go away. There is massive hope for crypto and we’re only just scratching the surface in terms of technological capability and adoption.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.