The purpose of this article is to highlight two altcoins that I believe have solid fundamentals – like a strong team, community, product, and marketing – but which are underperforming against Bitcoin (BTC).
Although both of these altcoins have been doing quite well against the USD (or USDT), the truth is that they are clearly struggling to gain some form of advantage over the king – something that is to be expected at the beginning of any bull run.
This is because most investors would prefer to own Bitcoin before buying into altcoins. It’s usually safer and less volatile – well, in terms of the crypto market at least.
What does this tell us?
For starters, people have been accumulating Bitcoin non-stop. The number of BTC addresses holding one or more Bitcoin is still increasing.
There was a massive altcoin bull run in 2017 and a lot of Bitcoin went into new projects’ wallets. Did said projects hoard that Bitcoin? I don’t think they did. What I think happened is that the same Bitcoin that was used to finance these projects was used by the teams.
The rest, as they say, is history. People are starting to understand the value of Bitcoin and have shifted gears. Instead of focusing on altcoins or other assets, retail investors have been focusing on aggregating at least one BTC.
Does that sound like the mentality of someone gambling? It doesn’t, at least to me. With retail investors (and as of late, institutional investors as well) continuously betting on Bitcoin, how can we argue Bitcoin does not have intrinsic value?
The market is stating otherwise. How does this correlate to altcoins?
Well, I argue that a great sum of money has come in to BTC from altcoins. To add to the discussion, I will analyse two projects I really like – one because it’s backed by IBM and the Linux foundation and the other because it’s aiming at disrupting the smart economy, which is something I truly believe can be done by decentralising some of the middleman functionality.
Stellar Lumens (XLM) is based on a decentralised network which consists of peers that can run independently of each other. The power to transmit information is completely distributed among a network of servers instead of being driven from one primary source.
This means that the Stellar network does not depend on any single entity. The general idea is to have as many independent servers participating in the Stellar network as possible so that the network will still run successfully even if some servers fail.
The Stellar servers communicate and sync with each other to ensure that transactions are valid and get applied successfully to the global ledger through its Stellar Consensus Protocol (SCP). This is essentially an improved version of a Federated Byzantine Agreement, where Stellar Lumens (XLM) holders can become validators or vote for validators.
The Stellar network experienced a huge breakout on May 16, mere hours after seeing a sharp correction that may have been tied to unexpected network downtime. Last week, XLM was trading at its highest level of 2019 despite a broad cooldown in the altcoin asset class.
In Bitcoin terms, XLM is trading at 1,700 satoshis – still close to its lowest point of the year around 1,360 satoshis. Does this mean XLM is now entering a new phase?
Fundamentally speaking, the network has been improving in terms of adoption, although there are clearly some issues due to the centralisation of nodes.
XLM has experienced several hot and cold periods over the past few months as the flow between altcoins and Bitcoin has affected its performance. XLM has lagged behind some of its large-cap peers in terms of overall performance, like XRP or EOS, but has also benefited from important fundamental news tied to several institutional partnerships with IBM and Wirex.
Investors betting on Stellar believe the protocol can solve one of the biggest issues facing emerging markets: financial inclusion. There are more than two billion people in the world who don’t have access to a traditional bank account. Stellar wants to help fill the void by providing a platform where people can send and receive money almost instantly and at virtually no cost.
IBM has built its World Wire payment platform on top of Stellar’s digital ledger. Today, World Wire supports 47 currencies across 72 countries.
I’m personally looking forward to closely watching the XLM/BTC price action for the next few months, as I believe Stellar will regain some of its losses against Bitcoin during the next bull cycle.
The smart economy proposed by the NEO foundation is based on three different layers:
- Digital assets: Users are able to register, trade, and circulate multiple types of assets through a validated digital identity protected by an immutable blockchain layer. NEO has two forms of digital assets: global assets and contract assets. Global assets can be recorded in the system space and can be identified by all smart contracts and clients, while contract assets are recorded in a private storage area of the smart contract and require a compatible client to recognise them.
- Digital identity: This refers to the identity information of individuals, organisations, and other entities that exist digitally (like a government-issued ID number).
- Smart contracts: The NEO smart contract system is based on multiple programming languages like C#, Java, and Python, which allows for quick integration with other protocols.
In terms of price action, there isn’t much to say. NEO has been losing value against Bitcoin. Last week it reached its lowest point since the bear market when it touched 126,000 satoshis. It soon recovered and is now trading at around 150,000 satoshis.
Personally speaking, I believe we’ve reached the capitulation phase, as most NEO holders who don’t believe in its vision are gone. So, I expect price to bounce back up to its April highs soon. I’m expecting resistance between the 20-day EMA and NEO’s previous yearly high, so between 165,000 and 180,000 satoshis. NEO should bounce between those levels for a while before reaching 200,000 satoshis and above.
In terms of fundamentals, during the recent Consensus 2019 conference, NEO CEO Da Hongfei revealed details of a new $100m EcoBoost program designed to support the growth of the NEO ecosystem. The EcoBoost program aims to focus on seed project activation, dApp growth support, infrastructure development, and institutional collaboration.
NEO has also moved its offices to Seattle in order to work more closely with key partners and companies.
How soon will NEO recover? That’s a question I cannot answer. However, in terms of fundamentals, I do see the team making improvements within the ecosystem to bring new players into the market.