by Marin Katusa, Katusa Research:
Do you like this chart?
Of course you do, anybody would.
After all, who wouldn’t want to make ten times their money in the span of a month?
This is what much of the cryptocurrency space looked like last year. You could’ve thrown a dozen darts at a board of digital coin offerings and likely made 10x your money from trough to peak on a handful of them.
Though there is undeniably a great amount of hype and mania surrounding the cryptocurrency space, there are also real, tangible ideas and technology behind all of it. And many of these ideas are actionable and investment-worthy vehicles.
Unfortunately, a lot of the times you’ll find that choosing the right investment can be like trying to find the needle in the haystack, as the below chart shows:
Now, of course, I’m not just trying to play the scaremonger here.
I know many who have made fortunes many times over in Bitcoin and other alternative coins (“altcoins”).
I’m going to show you data revealing that Bitcoin has become less and less relevant as an investment vehicle. And while there are several reasons for this, one which is becoming clear is that many investors believe the “easy gains” in Bitcoin have already been made. In the chart below, the data is saying that Bitcoin no longer carries the same dominant market weighting it did in the earlier days of cryptocurrencies.
Bitcoin’s market share has fallen drastically, and it now commands around a third of the total market capitalization of all cryptocurrencies.
For a long time, the performance of altcoins was closely tied to that of Bitcoin itself. Ever since the entire cryptocurrency universe exploded into the limelight last year, savvy investors have started to pay more attention to the things that differentiate each altcoin or token from one another.
Many cryptocurrencies have started to de-couple from their Bitcoin “peg”, and are now able to trade at valuations based more on their own merit (though it would be wrong to say that the price of Bitcoin doesn’t still influence the price of all other coins to some extent). Take a look at this decoupling below…
With all the money going into the cryptocurrency space, investors are clearly looking beyond Bitcoin, and have been for some time now. And while altcoins have been where a lot of that money has ended up, as you’ve previously seen, not all of the altcoins that glitter are gold.
So where else can that money go?
The Altcoin Alternative #1 – Bitcoin Mining
There are many different avenues to pursue when looking to invest into cryptocurrencies – the coins themselves are merely the simplest and most visible vehicle.
Building off of the coins themselves, one of the best alternative investment options is Bitcoin (or altcoin) mining. Bitcoin mining is how many of the early adopters got their start, as back in the day it could be done from your own computer with nearly negligible capital risk and expenditure.
These days, Bitcoin mining has scaled to such a large extent that only commercial Bitcoin mining projects can realize any sort of meaningful gain. This drove all the “artisanal miners” to lesser-known altcoins where the mining networks are not quite as saturated.
A number of these commercial Bitcoin mining projects have gone public. This allowed investors a way to cash in on the steady revenue stream that Bitcoin mining generates without having to go through the hassle of setting up a Bitcoin mine in their own basement.
Subsets of the Bitcoin mining space include companies who handle Mining-as-a-Service (“MaaS”), and companies that run master-nodes.
The MaaS companies contract a portion or all of their mining hash rate out to customers in order to receive a reduced, but more reliable income stream.
The companies that run master-nodes generate revenue from cryptos and operate as a type of super miner and blockchain protector that can perform unique tasks that other nodes can’t. DASH is the most well-known master-node-based cryptocurrency and doesn’t come cheap. The cost for a DASH master-node is around USD$800,000, or the price of a starter apartment, a few blocks away from Central Park in New York City.
Altcoin Alternative #2 – Bitcoin Exchanges
Investing in the Bitcoin exchanges that effect the transactions is another indirect way to cash in on cryptocurrencies. Right now, in any given 24-hour window, Bitcoin’s transaction volume amounts to some 600,000 BTC – or, given BTC’s USD $10,000 price point as of time of writing, some $6 billion dollars every day.
This volume works out to somewhere north of 150,000 transactions per day. Just how much money are these exchanges making? Transaction fees for Bitcoin currently sit around the $25 mark, not including the margins that exchanges charge for their spreads. With all of the other altcoins to consider too, there’s some pretty serious cash to be made in this space as well. However most companies worth their weight and our consideration are privately held, for now.
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