Cryptocurrencies and other forms of cryptoassets are getting more and more common among non-technical people mainly due to recent increase of a news flow about recent surge of its market price value.
Let's take a look at our findings on investability of these assets:
Basis of cryptoassets
First of all it is of high importance to understand the idea behind introduction of these cryptoassets. Blockchain technology – is the founding basis of cryptoassets. You can read a complex detailed technical explanation at Wiki but the essence of this technology is clearly expressed by these quotes:
- Don & Alex Tapscott, authors Blockchain Revolution: “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
- Guardtime.com: “Blockchain is a distributed database that maintains a continuously growing list of data records, chained together against revision and tampering.”
Benefits of Blockchain (BC) technology
Every new technology has to offer something new, something that produces more benefits than its older party. So here are the general advantages which BC might present to its users:
- Trustworthy system: conduct and verify transactions without a third-party involvement
- Transparency: the distributed ledger scheme grants the control of all their data and transactions to the users. BC data is complete, accurate and consistent with all the members. - conduct and verify transactions without a third-party involvement
- Faster transactions: physical markets even working with digital documentation takes longer time to execute transactions. Interbank transactions, especially in non-working days can potentially take days for clearing and final settlement
- Reduced transaction costs: a transaction system build using blockchain eliminates third party intermediaries and overhead costs for exchanging assets.
Simply saying, the BC technology saves costs for its users and has high usability for various industries – from financial and legal to industrial and health sectors. Therefore, by employing this technology companies are expected to cut their costs and become better positioned than their outdated competitors. So we understand that there is a sound basis behind the core base of cryptoassets with numerous potential users. However, it is necessary to understand that the technology is still in its infancy stage and there is a room for growth (for some years?) until usable software solutions will produces to meet global business needs.
Selecting the best cryptoassets for investing
The most intriguing part is to identify which of the offered cryptoassets might be the most beneficial to own. The key to success is to understand which of them will get better adoption rate – the ones should be selected by software developers community responsible for creation of user friendly software solutions. In our opinion it should have these 2 important features:
1) Early introduction and solid first users (first appearance)
2) Agile and flexible basis of its software (independent developers should be able to produce various software solutions)
Our choice of cryptoassets
As of today we have identified 3 cryptoassets which match these requirements (as of 12.07.2017):
1) Bitcoin (BTC) – the 1st global cryptocurrency and usually the basis for other secondary currencies.
- Presently, has the widest commercial use globally
- Total limited supply of coins by the end of mining: 21 mio units
- Current daily turnover: USD 222 mio
- Price per unit: USD 2,400
- Current market Cap: USD 39.4 bln
- Key users: Retailers (as a payment method)
2) Ethereum (ETH) – a digital token for facilitating online contractual agreements. Essentially, it is a platform for smart contracts.
- Total limited supply of coins by the end of mining: No limit (Exponental growth of mining difficulty is assumed as a fence against oversupply). Notes:
- Block 4000000, approx ETH supply 93262556, time '2017-08-15 18:20:24.642729' blocktime 30.01
- Block 4500000, approx ETH supply 95912556, time '2018-11-03 05:55:48.912370' blocktime 136.71
- Block 5000000, approx ETH supply 98562556, time '2025-10-02 11:47:30.658317' blocktime 835.81
- Block 5500000, approx ETH supply 101212556, time '2128-03-20 09:14:16.483692' blocktime 17183.83
- Current daily turnover: USD 265 mio
- Price per unit: USD 208
- Current market Cap: USD 19.4 bln
- Key users: Developers of blockchain-based software and tokens
3) Ripple (XRP) – currency exchange and remittance network. Basically, this is a blockchain-based payment system with advanced features.
- Total limited supply of tokens at the beginning: 100 bln
- Deflation feature: tokens disappear after transaction accomplishment
- Current daily turnover: USD 9 mio
- Price per unit: USD 0.20
- Current market Cap: USD 7.5 bln
- Key users: Financial institutions (especially banks: Skandinaviska Enskilda Banken AB (SEB), Standard Chartered, Mizuho FinGroup, UniCredit Group etc.).
These 3 cryptoassets appear to be leaders in their segments among other numerous counter-parties and therefore currently positioned better than others for further long-term market cap appreciation as more and more the BC (blockchain) technology will be used in business matters:
- Bitcoin (BTC) – the leading payment tool in the digital retail sector currently
- Ethereum (ETH) – the leading development platform for BC software solutions
- Ripple (XRP) – the leading payment BC protocol in financial sector.
We optimistically assess the trend of BC technology acceptance and therefore, we forecast increasing demand for its products due to the advantages offered by the technology previously described above. We do believe that BC will take a lion share of global business process during coming years. Therefore, we expect further appreciation of certain cryptoassets during coming years (next 10 years). As a result, we recommend any investor with long time horizon (10-20 years) to have 5-10% of his net investment holding in quality cryptoassets. Please note, that at present, the prices might appear to be over-pumped in short-term and therefore we can observe quite a considerable correction in prices across the whole cryptoassets sectos. Therefore, it is not the best moment to enter the market now and start a 100% position (as of 12.07.2017):
- We recommend to invest gradually a limited amount of investment pool in these 3 cryptoassets (or any others which have a sound proven base in your opinion)
- Invest monthly in small portions. Plan this journey for years (for quick profits please proceed to the gambling sector of betting, pocker and slotmachines)
- Expect huge volatility of paper returns
- Use reliable cryptoassets exchanges such as Coinbase or CEX
- Store your cryptoassets safely at your hardware device such as LedgerWallet (diminish greatly the chance of hacking or system error or even to scam from exchange owners - MounGox example)
- Explore investing opportunities of your cryptoassets while collecting them via cryptoinvest products such as BitBond to get maximum yield on your cryptosavings
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