Choosing your cryptocurrency: what should you buy right now?
Story by: Kathryn Kyte
Earlier this week, Google announced its plan to reverse its widespread ban on cryptocurrency advertising, which the tech giant imposed in June. The ad ban caused bitcoin’s price to fall some 10 per cent when it first came into effect. Come October, regulated cryptocurrency exchanges will be allowed to buy ads in both the U.S. and Japan, however, initial coin offerings (ICOs), wallets and advice on trading will continue to be banned, according to CNBC.
Google’s move follows Facebook’s decision to reverse course on its own crypto ad ban, now allowing some forms of cryptocurrency-related advertising to take place on its platform.
With more advertising dollars about to be poured into the space, the crypto world is about to draw in more new investors.
So when faced with the top three cryptocurrencies, bitcoin (BTC), ether (ETH) and XRP (Ripple), which should potential crypto investors buy into? The answer is in how much risk you can tolerate, and the kind of risk you’re willing to take.
“After the rally of the altcoins in 2017, we have witnessed a transfer of value in the market from altcoins to bitcoin,” says Christophe de Courson, CEO of Olymp Capital, the first European investment fund covering blockchain and the crypto asset ecosystem. “The bitcoin dominance on the cryptocurrency market has gone up from its lowest point at 32.5 per cent on January 13, 2018 to 56.01 per cent on September 13, 2018.”
“Bitcoin is still the most sound [in the market] because it was the first decentralized cryptocurrency ever launched and successfully evolved through the years while gaining worldwide adoption, and it has evolved to be recognized as a new asset class on which regulators had to take a clear position on,” de Courson said in an email to Yahoo Canada Finance.
He also says the story behind the creation of bitcoin (and the mystery around its creator’s name) contributes to its “uniqueness” and adding cryptocurrenices like bitcoin to one’s portfolio could offer a new way to “diversify investor’s portfolios as soon as institutions integrate this new asset class in their financial products.”
Financial advisor and millennial money expert Jessica Moorhouse thinks the very ambiguity behind the birth of the bitcoin and its lack of regulation is what makes it volatile and unappealing to non-bullish investors. Moorhouse argues that cryptocurrency is not really an investment at all — it’s a currency.
“It’s really more of an asset that you could buy, but in my mind it’s so new, there’s little information and we don’t even know who created the coin” she tells Yahoo Canada Finance. Moorhouse says she often has clients asking whether or not to invest in crypto and she cautions against taking the plunge, for now, unless “you are high risk to tolerance and you’ve already got a bunch of stable assets in your portfolio and you just want to dabble.” Moorhouse compares the cryptocurrency appeal to what’s being seen with cannabis stocks.
“It’s kind of the same level as cannabis stocks because it’s volatile but kind of exciting so people want dabble, which is fine, but for the average investor like me it’s not something I think is a good idea at the moment,” she says. Moorhouse advises those interested (and willing to bear the risk) to invest only two to five per cent of their portfolio to crypto, adding she does not have a strong conviction for any of the coins.
For blockchain analyst Andrew Macdonald it’s a matter of what an investor’s intent is when differentiating between the projects seen with Bitcoin, Ethereum and Ripple.
“Bitcoin aims to be a medium of exchange and store wealth while Ethereum advertises itself as a world computer that can facilitate a new wave of decentralized computing and applications. Ripple is a solution to improve the efficiency of communication between banks around the world,” he explains. Macdonald notes that there are some great investment opportunities in all three, but investors need prepare to lose money.
“A lot of these projects, unlike stocks, have no fiduciary obligations to their investors due to lack of regulatory oversight so investors need to exercise even more due diligence than they would in the stock market,” says Macdonald. Yet, Macdonald goes as far as suggesting that investing in cryptoassets could be more lucrative than the stock market right now because “in equities we’re seeing the tail end of a 10 year bull run whereas with cryptoassets we’ve seen a cyclical decline that we’ve seen four or five times before.”
Just last week the price of Ripple’s currency, XRP, skyrocketed up 80 per cent in 24 hours and rising some 100 per cent over the past seven days. It quickly rose to the number two spot on the cryptoasset food chain, ahead of Ethereum.
While Ripple’s overthrow did perk up some ears, Matt Spoke, CEO of the Aion Network and a member of the newly formed Blockchain Technology Coalition of Canada (BTCC), says the surge in XRP shouldn’t be taken too seriously because the run up “probably happened as a result of a couple large investors that are just pushing on the trading markets,” he says, rather than “Bank of America saying we need to take a large position in XRP.”
“You need to think about the value capture as well because it is different from the stock market,” says Macdonald. “Just because you own XRP doesn’t mean that you have any stake in the success of Ripple. You’re playing a game of supply and demand where you’re betting there will be significant demand for the Ripple protocol and their native token in the future because ‘they will be so successful’,” he says.
“Bitcoin is here to stay and can be seen as a long-term asset in your portfolio when XRP is more seen as a payment currency and ether as a token needed when using the Ethereum Network,” states Olymp Capital’s Christophe de Courson. “I would advise investors to diversify their portfolio by weighing their capital between those [three] and add some [assets] from the Top 20 [companies] by marketcap to better balance their investment.”
“XRP, the token, and Ripple, its related platform, are interesting,” says de Courson. “We saw huge growth last week in XRP’s price, after the announcementof a new cryptocurrency product coming by October and a new partnership with PNC, a major U.S. bank.”
Key to note is that while you need ether to use the Ethereum network, Ripple’s XRP is not needed when using the Ripple platform. However, Ethereum has a lock on since you need to buy ethereum in order to participate in most ICOs (initial coin offerings). This drives up its the price and keeps it vital, which for some, is a more sound investment.
But, Macdonald warns that cryptocurrencies aren’t guaranteed wins or prone to see the same return as seen in 2017, for example.
“I don’t think we will see two times returns on monthly time frames like we’ve seen in the past, but I’m extremely bullish on a five year time horizon…this bear market has weeded out a lot of the speculators in the market that were fueling exponential price increases, and now that the price has been stabilizing at lower levels, we’re seeing more institutional adoption, regulatory clarity and a focus on development,” he says.
Looking ahead
Aion’s Matthew Spoke argues that post 2018, we’re not going to be calling bitcoin, ether and XRP cryptocurrencies; we’ll simply refer to them as assets. He believes that “Canadian dollars are going to be represented on top of these technologies at some point in the near future…we’re just going to trade them off paper and in digital form.”
“Considering cryptocurrencies, people cannot use it to buy things like they easily do with fiat,” says Olymp Capital’s Christophe de Courson. “For instance, a loyalty program based on tokens is sharing more characteristics with a miles program than with fiat, even if people can exchange tokens for fiat.”
He also argues that investors should look at cryptocurrencies as investment and traders should look at is as currency.
“Some cryptocurrencies can be sued for payments like XRP because of the underlying technology but some tokens like ETH or VET are needed when using their own network and thus could be seen as an investment product if adoption of the underlying protocol grows over time.”
He also suggests that depending on the intrinsic features of each cryptocurrency, “some can be seen as a ‘wallet’ for storage of money like some stablecoin projects currently under development, like Basis.
Macdonald predicts that bitcoin will hit USD$35,000 a coin in 2020, and that “ethereum and XRP don’t have as high of an upside” but he argues ethereum is “a safer investment than XRP.”
Original story by: https://www.yahoo.com/news/choosing-cryptocurrency-buy-right-now-175436202.html
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