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Cryptowriter: Will The Altcoin Season Continue?

Since 2017, things have been rough in the cryptocurrency and blockchain world. After the market demonstrated that it would reward viable projects with value, many projects spent the better part of two years in the tank, beaten down and indeed staring into the risk of failure. The “Altcoin Spring” of 2020 showed a steady, stable growth pattern which was only briefly interrupted by the onslaught of COVID-19 and the weak market recovery which followed.

Pressure on the sell side was overwhelmed by activity on the buy side around the rise of DeFI, a new implementation of blockchain technology that promises to make capital more available and cheaper than ever. Skyrocketing gas prices demonstrated the value of Ethereum and DeFI while simultaneously highlighting the virtually unlimited market for faster and cheaper blockchains.

Despite all of this good news and the strong bullish trend which accompanied it, the stimulus bill was viewed as a needed shot in the arm which ultimately never came. News on Tuesday that Trump decided to call off talks with House Democrats was met with a sharp market sell-off.

Many tokens, including Ethereum (ETH) as well as Bitcoin (BTC) itself, have shown remarkable stability in this extraordinarily unstable situation. It is possible that the market has recognized cryptocurrencies as an acceptable store of value—stablecoins and otherwise. If this is the case, Bitcoin could double or triple its previous all-time high and lead the way to a full on cryptocurrency and blockchain revolution.

The market has consolidated nicely throughout the month of September, with Cosmos (ATOM) prices remaining mainly in the $4 to $5 range and only dipping into the high $3 range for a short moment. BAND Protocol (BAND) has dipped considerably from its August high around $17, most likely thanks to its small market cap and relatively small circulating supply. Bitcoin (BTC) stayed over $10,000 and Ethereum mostly stayed above $350, with strong support for both of the largest cryptocurrencies by market cap overwhelming the touch and go politics and news of a very tough month.

 

Altcoin Favorites

Tokens which have done exceptionally well throughout the past few rough months include Chainlink (LINK), BAND Protocol (BAND), and of course Cosmos (ATOM). It appears that the market is likely to favor altcoins which focus upon blockchain interoperability, though OmiseGo (OMG) as an ad hoc Ethereum speed booster has also found traction this year.  

Across the industry, volume is likely to skyrocket as these and other blockchains are increasingly relied upon to automate technologies that are interacted with by more and more users, more and more often.

In the past, I’ve wondered about which blockchain would be the HD DVD and which would be the Blu Ray—but I think it’s important to realize how weak that analogy really is here. There is a whole new world coming online, and of course that involves major market potential for many different comers.

Ethereum and Bitcoin have already justified the existence of cryptocurrency, and if Cosmos and Chainlink facilitate applications that are truly capable of working seamlessly with various blockchains and securely integrating off-chain resources, specialization for almost any purpose is likely to find a solid foothold in the market.

Despite the down economy, the success these technologies have shown in the market indicates an intensely rich possible future for increasingly robust applications. The US Postal Service unveiled a patent for a blockchain based voting system last month, and it’s likely that simpler financial rules for cryptocurrency will follow in the near term.

Perhaps we haven’t reached the point where cryptocurrencies and blockchains will reinvent commerce and technology applications quite yet, but that moment seems more inevitable each day.

 

Why ATOM and BAND?

The Cosmos ecosystem is dedicated to interoperability. DeFI project KAVA is Cosmos-native, and BAND Protocol serves a similar purpose to that of Chainlink--which is to say it is an oracle that delivers information from off-chain sources securely and in real time. Cosmos has a market cap currently of about $1B, down from its peak of $2B in August, and up from its low of around $400M earlier this year during the crash.

Both ATOM and BAND rely upon a few core Cosmos principles: DBFT (decentralized byzantine fault tolerance), which allows for financial punishment of misbehavior known as slashing, and PoS (proof of stake), which allows users to be rewarded for staking tokens as part of the blockchain validation process.

I was fortunate enough to jump ship from Tezos (XTZ) and land in ATOM a few months ago, which has turned out to be the best move I ever made. As a result of the success I stumbled into, I was incentivized to figure out how on earth ATOM could be outperforming XTZ, my then-favorite token. 

Tezos is very cool, and they’re growing their ecosystem via ICO offerings and perhaps even NFT modules. The transactions take 20-30 minutes, or have the past few times I’ve used their chain, but one problem with the ecosystem is that the Proof of Stake validation is inconsistent and doesn’t provide feedback to end users in real time. So you get your XTZ staking rewards about 30 days after the fact--if you get them at all. Some validators simply don’t pay out the rewards they said they would, though I believe the team is working on this problem and XTZ could see a significant bounce with all its traffic after the problem gets taken care of. 

For the moment, XTZ is rather stagnant, but the real story is that during an intensely strong bull market, XTZ failed to really break out. Before the crash in March, XTZ was flirting with $4. It almost got to $4.50, but didn’t set a new high end. This reflects slow adoption and a lack of confidence which accompanies some underlying problems with the project.

ATOM, as opposed to XTZ, provides more rewards and provides them in real time. However, XTZ tokens do not have an unbonding period when you unstake them, which makes XTZ far more liquid than staked ATOM. Coinbase and Kraken both provide their own spin on staking rewards, paying 5% and 7% respectively, in real time, with no ATOM lockup. However, I’ve still opted to leave my ATOM staked in Atomic Wallet at 10% despite the lockup, just like 60% to 75% of other Cosmos holders.

The overall trend we see on the 1d chart for ATOM is a rather dramatic price movement toward higher and higher numbers.

It may be possible that ATOM will end up breaking the $9 resistance point by the end of the year, and who knows? If that breakout takes place, we could see ATOM prices run to $20.

BAND prices have been extraordinarily volatile this year. The token was trading for around $.30, then suddenly it spiked in price! It was worth more than Chainlink for a few brief moments during the DeFI surge, even!

Things have calmed down a bit for BAND holders as the weak month of September dragged on. I know there are over 80M BAND tokens in circulation, but Coinbase only lists the 20.5M ERC-20 BAND tokens that still exist. The BANDChain variant is where the rest of the 100M total supply will be found after they’re all issued, but Coinbase lists the Market Cap for BAND Protocol as $130M currently. Price * supply = 130M…. But supply is actually 4x what they’re plugging in. So the actual BAND market cap should be just over $500M--almost half of the value of its home chain, Cosmos (ATOM)!

My guess here is that Cosmos itself is significantly undervalued at current price levels. With the ETHOnline Summit ongoing, perhaps it is blasphemous to talk about new blockchain technologies, but Cosmos moreso than Avalanche or any of the other ETH sidechains is in a position to begin to provide value to the applications people are building on ETH. Lower transaction costs, speedier transactions, and the ability to interoperate with other chains such as NEO or TRON will ultimately ensure that Cosmos is getting plenty of use. 

 

Forecasting

For the end of the year, I have a very bullish feeling. Once the politics settles down a bit and the issue of who the next US President will be has been resolved, people will turn their attention to markets. And frankly, cryptocurrencies have done extremely well this year. In 2017, the big boom was driven by the media suddenly seizing upon Bitcoin as a talking point. Prices exploded, a lot of people lost money, and then the market receded.

The underlying strength we can see in the market today--in Cosmos, in Ethereum, in Bitcoin, and in so many of these altcoins that have withstood the pressures such as Polkadot--there are too many success stories to count. 

So my prediction is this: if the DeFI hype continues, it could become a central talking point for the American financial media, which could be a much more central part of the average person’s news diet if politics calms down. If and when that happens, it will be extremely likely that the market will become MORE bullish than it was in 2017. Altcoins may still not be accepted as a major store of value, but traders who bought BTC low this spring are going to be getting ready to sell it high and when they do, they tend to invest in up-and-coming altcoins.

My strategy will be to pick up as much ETH and BTC as I can over the next month or so, prepare to sell it, and then move heavy into BAND, Cosmos, and Chainlink. 

 

Disclaimer

Nothing in this article constitutes financial advice. Content provided only for entertainment and informational purposes. If it were financial advice, it would probably be terrible because its author is a philosopher and a bit of a scientist, but by no means any sort of authority on anything financial at all. All investments carry risk and the author of this article assumes no responsibility for any gain or loss incurred by a reader under any circumstances.

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