What are Altcoins?
Altcoins are all other cryptocurrencies other than Bitcoin. In our opinion, while they may offer all kinds of alleged utility, they all offer extremely limited value as a long term investment and are subject to censorship and centralization risk.
Ultimately, we believe that they should be avoided for the purpose of long term investment. Trading altcoins over the short term has been shown to be a profitable endeavour, if you are a skilled trader or manage to get lucky. However, when you price all altcoins in Bitcoin and track their performance over any period of time greater than 2 years, you will see that they have massively lost value. Trading is an extremely difficult profession, with the vast majority of amatuer traders losing money over the long term. We suggest that you leave this to the professionals and rather take a long term, investment view of Bitcoin.
What is Ethereum and why is it smoke and mirrors?
When looking at the underlying methodology and culture of Bitcoin as explained above; Ethereum seems to differ drastically.
First of all, around 70% of Ethereum was ‘pre-mined’ by the founders of Ethereum. This is more than 50% of the total supply. Why they chose to do this remains the question; but this has always been an alarm bell to many prudent investors.
When comparing to a Ponzi Scheme – there are easy comparisons to make here where a ‘few hold many’.
Secondly, Ethereum chose to roll-back a hack that occurred on DAO a few years ago. This caused a split between Ethereum and Ethereum Classic. Many have asked the question; how can Ethereum be decentralised where a select few can change the rules and historics when they want?
How can someone on Ethereum ‘be their own bank’ like one can on Bitcoin’s network?
As Ethereum is trying to be a distributed, global supercomputer – distribution of nodes should be key to this goal. Yet, most of the network’s power is run on AWS and not by individuals worldwide.
When thinking in first principles, wouldn’t it be plausible to rather invest in Amazon Web Services, rather than Ethereum if that is where the underlying network lies? Ethereum Full Nodes are extremely data intensive, are hard to set up and even though there are numerous nodes worldwide; many seem to be out of sync as the supply total differs from node to node.
Ethereum has had a history of scammy ICOs built on top of its chain which only worsens the culture, brand and the network capacity/fees – as it tends to become ‘choked’ by these other blockchains.
Lastly, Ethereum’s narrative has been a ‘super-computer’, a ‘store of value’, a ‘smart-contract blockchain’ and many titles that shift with the ebb and flow of bear and bull markets. Even though it has central leaders and thus, central points of failure – it seems that it is in fact leaderless and without a set direction.
Bitcoin is fixed in his goal. It is going against central banks and their authoritarianism. Bitcoin’s network on its second-layer, Lightning Network, allows millions of transactions per second. It also had a third-layer in development. All layers allow for simplistic to advanced smart contracts. There is decentralised finance (DeFi) in Bitcoin such as HodlHodl where willing buyers and sellers can seek collateral against loans in a non-intermediary manner.
Bitcoin doesn’t have a select few to control it or a marketing department to pump it. It simply focuses on taking each step at a time to reach its fundamental goal; Hyperbitcoinization.
Why Dogecoin is a bad bet?
For those who don’t know, Dogecoin was created as a joke that has grown into a multi-Billion Dollar market cap and will likely turn into a nightmare for many in the coming months.
Yes, Dogecoin has outperformed Bitcoin and Ethereum in the first two quarters of 2021, but when looking at its fundamentals – critical mass will undoubtedly be reached and massive drawdowns are likely to come.
Dogecoin is infinite in nature. It has a daily issuance/supply of 14.4m new Dogecoin. There is no cap to this (Bitcoin is capped at 21million BTC by 2140 AD). With 5.2 Billion Dogecoin being added to the supply every year, it needs incredible inflows of USD to keep its valuation.
Issuance of new Dogecoin is unpredictable and can and has been changed in the past. In 2014 the finite cap of the supply changed to an infinite number. Dogecoin is also not decentralised at all. There are only a few hundred nodes running its blockchain. One wallet/address holds >27% of the total supply of Dogecoin and 101 addresses own around 67% of the total supply.
Its current hashrate is around 248 TH/s whereas Bitcoin’s is at 176,000,000 TH/s in May 2021. These are scary numbers for a decentralized network – where once again a few economic actors hold most of the power.
Dogecoin is extremely illiquid globally and only a select few exchanges provide liquidity. The peer to peer markets are negligible and there are hardly any formats for self-custodying this asset. Most Dogecoin is kept on exchanges where third party risk is always a danger. In Bitcoin, close to 75% of Bitcoin is kept in a self-custodial manner, in cold storage.
Dogecoin’s code base has not been updated since 2017 and lastly, this coin has a pattern of extreme pumps and dumps since 2014. Nothing in the current climate reflects this has changed.
Like the altcoin frenzy in 2017, similar patterns are playing out and once again, only a few will sell the top whilst the many will watch their returns and initial base dwindle drastically.
Why holding Bitcoin is the best strategy over the long-term
Some Bitcoin proponents say that Altcoins are growing in such popularity as the current US Dollar is losing its value through relentless money printing.
Nonetheless, most prudent analysts, economists and the average Joe don’t see governments turning off the taps of endless money printing any time soon. They simply can’t – as it is their last tool left to keep the current system running.
Inflation is happening on two fronts. One from constant printing and the other from supply shocks in ill-invested sectors such as oil and other commodities. The Coronavirus shock led to a deep drop in demand for oil but as the World turns back on; there has not been enough to plan for the increase in demand. This will likely lead to considerable increases in the oil price and thus, thousands of products across the world – directly and indirectly.
Other scarce assets of course will increase in value as they have been for the past few months. This places pressure on consumers but also with investors holding low-yield asset classes. It’s hypothetical, yet prudent to think investors would seek an asset that has sound principles with more than 200% return year-on-year; Bitcoin.
As explained through this article, there are vast and fundamental differences between Bitcoin and other altcoins. Bitcoin is the only truly decentralised, scarce and sound cryptocurrency on the market. It can do everything that other altcoins can do but it does it better and in a more secure manner.
There was only ever a need for one Internet. There is only a need for one Blockchain – Bitcoin.