Dogecoin, initially conceived as a satirical take on the bitcoin craze, currently boasts a market capitalization of $1.6 billion. Despite its high valuation, the cryptocurrency lacks a clear practical use or distinctive features, casting doubts on the justification for its price.
Nolan Bauerle, the research director at CoinDesk, predicts a harsh outcome for the majority of existing cryptocurrencies, estimating that 90% will falter in a potential market crash. Only those with robust fundamentals are expected to survive and possibly thrive, yielding significant rewards for early investors. This outlook aligns with RBC Capital's bold forecast, which pegs the potential market cap for cryptocurrencies at a staggering $10 trillion.
However, distinguishing the potential winners from the losers in this volatile market remains a daunting challenge. Even Bitcoin, the most renowned and valuable cryptocurrency, struggles with high transaction fees and slow processing times, hindering its adoption for mainstream economic transactions.
Jake Brukhman, co-founder of the blockchain advisory and investment firm Coinfund in Brooklyn, points out that cryptocurrency valuations often do not reflect underlying economic fundamentals. Instead, prices are driven by speculative bets on the potential for broader adoption and the future utility of decentralized networks, as noted by Brukhman: "It's essentially a wager that information and awareness will lead to adoption." He views cryptocurrency pricing as largely based on optimistic speculation about the future of these technologies.
Cryptocurrency Evaluation
Before investing, Christopher Grey, co-founder of CapLinked, an enterprise software company, recommends focusing on three areas. Find Your Next Cryptocurrency Investment Here.
The founders' and project teams' prior experience is the first consideration. Even though cryptocurrency and blockchain technology is still in their infancy, their origins can be traced back to existing businesses. The smart contract tokens of Ethereum can be used to link pieces inside well-established industries, for example. As a result, knowledge gained via experience is valuable.
If a project team member lacks crypto or blockchain skills, an investor should inquire how their prior work qualifies them for the current project." Grey asks, "Have they at least worked in the same industry?"
Investors should also review the terms of the offering. The quantity raised and the amount that goes to investors are two crucial factors to consider. In this case, traditional stock-based indicators aren't relevant.
Bitcoin marketplaces are a reverse of the usual business model in that entrepreneurs may seek finance before they have a stable customer base or the ability to sell their products.
"If someone wants to revolutionize the entire world of banking and they're only raising $5 million, there would be a tremendous divergence between what they want to do and how much money they are raising," says Grey, who adds that the contrary is also true. In other words, the better a company's chances are, the more focused it may be.
In the end, investors must examine the technology itself. In the absence of any tangible evidence, "if it's simply an idea, a white paper, without anything built, you'll be forced to rely solely on the faith of the team," adds Grey. How does a product produced by a team function?
This conclusion should be viewed with some skepticism. Cryptocurrencies, according to Brukhman, are among the least fascinating uses of blockchain technology. "We don't have a solid understanding of that," he says, referring to how cryptocurrencies might affect the market.
Which Cryptocurrencies Will Survive in the Future?
The top 20 most traded cryptocurrencies are a smart place to begin. Identifying a few notable survivors from this list is not difficult in the event of a cryptocurrency market meltdown. When it comes to digital currency, Bitcoin is the original. In addition to Litecoin and Bitcoin Cash, its blockchain and codebase have also produced offshoots. Commonly used cryptocurrency. Populous, a token based on the Ethereum network is one of many decentralized applications (Dapps) gaining interest.
Others, like Dash, have made similar claims and established themselves in both emerging countries like Zimbabwe and affluent ones like Spain. NEO could be the surprise package. For this purpose, it has teamed up with the Chinese government and is promoting a smart economy. Also, Microsoft China and Japan's Ministry of Economy are among the organizations it has collaborated with in the past.
On the other hand, the lower down the list you go, the more likely investors will need a higher level of risk tolerance. Consider TRON, a cryptocurrency that has lately soared in value despite its founder's apparent lack of product knowledge. When it comes down to it, Request Network purports to represent. it's just an online money-transfers-aggregation service that just shifted its focus.
