Independent Financial Analyst (PHOTO/Courtesy).
Cryptocurrency, a term loathed by governments and traditional investors, feared by banks, idolised by speculators; because of its disruptiveness of normalcy, that is, transferring the power of money from governments to private institutions and individuals.
This phenomenon was foretold as far back as 1921 by among others — Henry Ford, who was quoted as saying: “In times to come, money will be based on units of electricity, government notes will be priced in that unit and all commodities will be priced in that unit.
“Wages will be paid in that unit”. He [Henry Ford] went on to call this money an ‘energy currency’.
Nobel laureate in Economics —Milton Friedman in 1999 spoke of a reliable e-cash on the internet where funds would be transferred from one person to another without having to know each other and with no record of where it’s coming from.
“That kind of thing will develop on the internet and that will make it easier for people to use the internet,” he said.
What these two visionaries visualised, strikingly resembles cryptocurrency and block-chain technology.
A cryptocurrency is a virtual, digital currency that is based on block-chain technology and secured by cryptography but isn’t issued by a central authority (central bank). It’s decentralised in working, implying; there’s no third party controlling it except it’s community of users.
These users record their transactions at the same time and any attempts to dupe the cryptocurrency will be noticed and the transaction rejected.
Cryptocurrencies are an asset and a medium of exchange that are bought, sold and traded on an exchange. The key software for creating cryptocurrency is open source meaning; anyone can create a cryptocurrency.
A major advantage cryptocurrencies hold over fiat money (paper currency) is: A Cryptocurrency can’t be debased—its value can’t be deliberately lowered; and they are secure from inflation because there’s a predetermined limit of how many coins can be mined for each cryptocurrency.
The first cryptocurrency—Bitcoin was created in 2009. According to coingecko.com, there are 10,635 cryptocurrencies and 521 exchanges as of 11 November 2021. Some of the well known cryptocurrencies are: Bitcoin, Dogecoin, Cardano, Ethereum, and exchanges: Coinbase, Binance, currency.com.
As of today 11 November 2021, the global value of all cryptocurrencies is $3 trillion.
Generally, cryptocurrencies garner a lot of attention and generate a lot of noise as those holding and trading them, portray the coins as a mother lode of fortune.
However, surveys have shown that only one in ten people know how they work; and that a third of cryptocurrencies’ investors themselves know little to nothing about them.
In short, the vast majority of people investing in alternative coins are responding to the craze surrounding them and succumbing to the herd behaviour rather than understanding the underlying fundamentals of block-chain technology.
With the superfluousness of cryptocurrencies, below are two alternative coins I would bet on; and attached are the reasons why.
CARDANO (ADA)
Founded by Chris Hoskinon—one of the original founding members of the coin–Ethereum in 2015. Cardano whose currency is called ADA, is the sixth largest cryptocurrency by market capitalization and is valued at $67 billion. It [ADA] goes for $2.10 as of today 11 November 2021.
In the past one year, it has seen a 1884% rise; meaning $1,000 invested in ADA one year ago would currently be valued at $18,840.
ADA’s success, is going to be based on Chris Hoskinon; whose business acumen led to his fallout with Vitalik Buterin (Ethereum founder) because he believed Ethereum should have been commercial. This money-minded mindset, is an important trait to bet on for the commercial success of ADA.
All major enterprises’ successes, have been based on the skipper(s) heading them seeing as they carry the vision for the whole enterprise and are influential in determining how far the company will go. Case in point, Bill Gates for Microsoft, Steve Jobs for Apple, Elon Musk for Tesla.
The fact that Chris Hoskinon has a commercial mindset means that he is going to be working on ways to make ADA profitable for the holders.
In the past one year, he has managed to achieve that by making ADA more profitable than two of the biggest coins: Bitcoin which has risen by 327.3% and Ethereum that has shot up by 959.3%, compared to ADA’s 1884%.
Additionally, Cardano’s Proof of Stake (PoS) network is eco-friendly and uses less power compared to other coins. This is going to earn them a lot of adoration from the zero-emission bloc and a positive image which will easily result in the increase in value of ADA.
To conceptualize how ADA’s power consumption pales to that of bitcoin in comparison: The electricity used to mine bitcoin is more than that used by Austria while ADA uses electricity equivalent to that of a small town.
Further, while the fees used to pay for transactions on Ethereum’s block-chain are increasing, those on Cardano’s block-chain are lowering and more stable at $0.17.
Also, ADA’s block-chain got an upgrade (Alonzo) that allows users to develop and execute smart contracts and build decentralised applications.
A smart contract is a digital contract written in code and available to authorised personnel on a block-chain where it’s stored. It cannot be changed and doesn’t have a third party which makes tampering with it almost impossible until the contract has been fully executed.
For good measure, ADA’s block-chain allows users to borrow or lend funds in minutes as well as earn interest in a savings like account on their Decentralised Finance (DeFi).
On top of that, ADA has thoughtfully teamed up with governments like Ethiopia to provide infrastructure for block-chain verification of grades and remote monitoring of school performance.
This, it has done through Atala Prism—a decentralised identity solution that allows people to own their data and interact with organisations privately.
This move by ADA is brilliant because it introduces it to the much ignored market of Africa which is an oncoming hub of technology.
The keenness of ADA to social aspects of life like education, its agreeable carbon emissions record and extension to the emerging markets; together with the commerciality of its leader, make it a good buy in the long term.
DOGECOIN
Created as a joke, to poke fun at cryptocurrencies in 2013, the coin is the ninth largest cryptocurrency with a valuation of $34,808 billion as of 12 November 2021.
Today, 12 November 2021, one Dogecoin token is priced at $0.264037. In the past one year the coin has risen by 9402.2%; implying $1,000 invested in Dogecoin a year ago would be worth $94,022 presently.
“Dogecoin is the strongest currency as a medium of exchange”: Observed Mark Cuban, billionaire and owner of NBA team Dallas Mavericks, which is among the many corporations that accept the coin. His statement was backed by Elon Musk who replied to his statement: “I’ve been saying this for a while”.
Mark Cuban also acknowledged to CNBC that Dogecoin’s community was the strongest in using it as a medium of exchange.
The coin is part of the portfolio of the world’s richest man — Elon Musk who once tweeted: “Yeah, I haven’t and won’t sell any doge”. This tweet shot up the price of the coin over $0.20 briefly.
Musk’s individual influence is well-known in the crypto world as he singlehandedly skewed the price of tokens: Bitcoin by making an announcement that his company [Tesla] was going to accept payments in the coin; and Shiba Inu by posting an image of the dog on his social media.
Elon Musk owns two companies, one public [Tesla] and another private [Space X], and his mercurial, nonconformist character, is bound to lead him to make remarks, and decisions that affect his portfolio giving them the much needed attention they need for their values to appreciate.
Dogecoin has been given free publicity by Hollywood that has made it standout among the other tokens.
Applying Keynes’ investment strategy—the Keynesian beauty contest, which suggests that when asked to choose a winner among beauty contestants, people don’t choose the contestant they think is most beautiful, rather, they choose a contestant they think others will choose to be winner.
Using this rationale, I would buy Dogecoin because it is part of the portfolio of some of the world’s most influential people, and a highly valued choice of a multitude of investors. At $0.264037 a token, it is very affordable.
Basing on the mentioned parameters, due diligence, and utmost prudence, Cardano and Dogecoin would be my cryptocurrencies of choice.
It is greatly advisable that everybody anticipating a plunge into the world of cryptocurrencies takes absolute caution, and exercises due diligence because the crypto world is an extremely volatile and risky world.
It helps to think for yourself and not follow the crowd.
Mark Kidamba
Independent Financial, Investment Analyst
Twitter: m_kidamba
