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Crypto-currencies investment analysis

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Crypto-currencies investment analysis

 

Portal investtalk.ru starts a straightforward investment analysis of crypto-currency. Winners of competition “The best private investor” on Moscow exchange took their parts in review creation.

 

The first basic estimations.

 

Before statement of our opinions and estimation of crypto-currencies, it is necessary to notice several important units.

 

Investments in crypto-currencies – is, undoubtedly, a heightened risk, connected with absence of legal basis and exchangeable practices, legalized officially; with absence of guarantee for execution of transactions using crypto-currencies; with technical risks, connected with possibility of breaking of different system elements; with absence of reliable protection against breaking of final user, and any possibility to return funds in the case of theft, and other special aspects of crypto-currencies.

 

In this analysis, we will use a ten-point scale to range different parameters of crypto-currencies. If estimate a risk parameter of investment to crypto-currencies, we evaluate this risk at the high level:

 

Let us take 1 point (minimal risk) for investment in German government stock and purchase of immovable property in Manhattan,

2 points – purchase of immovable property in Moscow,

5 points – investment in “blue chips” of stock market,

6-7 points – investment in innovative starts-up,

and 10 points – participation in pyramid scheme and lottery (maximum risk, high probability of losses).

 

So, in this list, investment risk of crypto-currencies takes 8 points.

 

But, it should be added that margin of potential profit is less limited than in investments till 5 points including.

 

Thereon, the matter of general risks is settled, it should be added that our recommendations have only evaluative judgment, and could not be a sign for taking investment decisions, but in the case of their taking, we don’t bear any responsibility. If you meet some critical discrepancies, or you have essential additional information, not reflected in this review, please, sent it to our e-mail: info@investtalk.ru, and it will be definitely posted in the next review after its checking.

To analyze crypto-currencies, we will dwell on those that are available on exchange btc-e.com. This is due to this exchange was tested by us with a view to input and output of tangible assets, and could be considered conditionally “tested”.

 

There is a list of analyzed crypto-currencies:

BTC, LTC, PPC, NMC, NVC, TRC, FTC, XPM.

 

Capitalization of crypto-currencies:

US $

BTC 7,907,884,750

LTC 420,320,040

PPC 65,830,835

NMC 29,898,915

XPM 8,140,478

FTC 7,328,541

NVC 6,562,476

TRC 1,941,250

 

The main resources of information on which the analysis is based: forum bitcointalk.org (as information resource for all crypto-currencies), official sites of every crypto-currency, coinmarketcap.com, some servers and aggregators accepting crypto-currencies, some additional information resources.

 

So, let’s start. The analysis will consist of scoring of every key parameter of crypto-currencies, which are important for general investment estimation. In many cases, bitcoin will have a maximum (or minimal) score, being like starting point for estimation of others.

 

Information component, presentation and mentioning of crypto-currencies in big and medium Media.

 

Points

BTC 10

LTC 3

PPC 2

NMC 1.2

XPM 1

FTC 1

NVC 1

TRC 1

 

Comment: Undoubtedly nowadays, almost all news environments are belonged to Bitcoin. Lightcoin is mentioned due to its sharp increase of capitalization, with essential particularity and differences of Bitcoin, as well as bearer of title “the second crypto-currency” or even “an alternative currency of Bitcoin”, but mainly with the purpose of self-advertisement of article writers that however not exclude the validity of many statements.

 

Peer-to-peer coin (hereinafter PPC) is mentioned due to nonconventional particularity of idea and organization, that differentiates it from the list of aforegoing “clones” of Bitcoin. There is not a lot of information about other crypto-currencies, predominantly in limits of bitcoin-clubs and small reviews. We can see a strong dependence between capitalization growth and information support of crypto-currency in world Media.

 

Rate stability.

In this case, it is referred to possibility preferably for “bulls” to buy harsh drawdowns, in the case of sell of a big volume or appearance of negative news according to crypto-currencies in general, or in each in particularity. The buyer’s force, in this case, is defined by the number of those, who want to buy this crypto-currency for favourable price, and closely connected with above mentioned paragraph “information component”.

 

BTC 8

LTC 5

PPC 2

NMC 3

XPM 3

FTC 3

NVC 3

TRC 4

 

Comment: Bitconi could be considered as a stable one, thanks to continuous information support and enter of new investors, interested in purchase with pullback of rate. However, the score of 8 points is related to the current rate of Bitcoin is not far from maximum one, that causes the further drawdowns. Lightcoin, apart from information support, has a factor of essential correction against maximums that gives it a stable position to drawdown. It couldn’t be said about PPC, capitalization of which is still high, and information support may not always be enough. Other crypto-currencies don’t have high capitalization, they are in correction process that increases their stability. Here, Terracoin appears, its capitalization is as low so in marginal trader’s terms “nowhere to fall”.

 

Liquidity.

There is just one relatively qualitative way to compare the liquidity: look on trading volumes. This parameter we will estimate in the following manner, like we are interested in transaction with average amount – $ 150 thousand.

 

Points

BTC 10

LTC 8

PPC 4

NMC 4

XPM 2

FTC 3

NVC 2

TRC 1

 

For mentioned amount, position in BTC and LTC should be just relatively opened and closed, not making a perceptible price drift. PPC and NMC immediately lose in liquidity, but the existence of US dollar cross rate relation is their essential advantage. FTC could be changed only to Bitcoins, however at carrying-out of an analysis, an order book was enough full on both sides. The tiniest liquidity is inherent to TRC, and it is connected with low level of capitalization. Any essential transaction with this crypto-currency can cause a drastic change in its exchange rate.

 

Popularity upon carrying-out of goods and service payment.

It is important to understand and remember that in this case standard 10 points of Bitcoin in no way mean its worldwide popularity, it is just for comparison. To explain this idea, we expand the list a little.

Points

USD 1000

EURO 800

RUB 500

 

BTC 10

LTC 4

PPC 2

NMC 1

XPM 0

FTC 1

NVC 0

TRC 1

 

Actually, the range of companies, applied Bitcoin, is enough wide. Lightcoin tries to follow the same way, but it is a big distance between them to reach parity. PPC, NMC, FTC and TRC on their official sites and forums have some quantity of functionality and services, approving them for payment, as well as aggregators, that apply many crypto-currencies at once. According to this parameter, XPM and NVC can’t reach a minimum point, as they are not presented in sufficient amount in the list of accepted crypto-currencies.

 

Transaction rate as a parameter of effectiveness

 

Points

BTC 1

LTC 5

PPC 1

NMC 1

XPM 9

FTC 5

NVC 1

TRC 6

 

In this case, transactions with Bitcoin are considered as the slowest. Lightcoin and FTC have their block building happened in 4 times faster, Terracoin – in 5 times, and Primecoin in 10. Let’s leave “10” points for those which speed up the process even more. Other crypto-currencies couldn’t approve themselves per anything.

 

Intermediate-term risks of project “close”

“Close” means a termination of crypto-currencies support by implementers and club. This parameter is estimated enough subjectively, besides others. It is based on analysis of official sites, the last renewal date and club’s activity.

Points

BTC 0

LTC 0

PPC 2

NMC 4

XPM 3

FTC 3

NVC 4

TRC 3

 

Comment: In general, we value at a low rate the possibility of “close” of any project, it is pointed by absence of scores from “5” and more. The down of the main idea and creation sense of the crypto-currency – appearance of distributed DNS-servers and sited in .bit field is enough essential risk for Namecoin (4 points).

The problem of Novacoin is insufficiency of its own big club, as even references for discussion leads from official site to other resources (there is no exact information).

 

Growth potential.

At the present moment, we have analyzed a big quantity of moment to give the first recommendations. To do it, taking into consideration the precedent parameters, let’s define on a provisional basis a growth potential for every crypto-currency. We will do it on two intervals – intermediate-term (30-60 days) and longer one (100-150 days). During forecasting, “average-positive” plan for every crypto-currency, and this plan is concluded on the fact that in future a paradigm of “crypto-currency” will be perceived in the world with enthusiasm.

Considering that this analysis didn’t pretend to deep reviewing of each of crypto-currencies, we will not make detailed comments. You’ll find them overestimated in the following reviews.

 

Intermediate-term (%) Long (%)

BTC 50-100 100-200

LTC 100-150 200-400

PPC 100-200 150-300

NMC 50-100 100-200

XPM 100-200 200-400

FTC 100-200 200-600

NVC 100-200 200-600

TRC 300-600 500-1500

 

Growth potential of Bitcoin and Lightcoin are not limited from above for a long period, but due to high fluid capitalization it can’t be realized very quickly.

 

PPC is still enough perspective crypto-currency, and despite fluid capitalization, save its growth potential. At the same time, high level of capitalization makes for it some risk for parameter “rate stability” upon the negative scenario.

 

Namecoin can improve its perspectives, in the case of come back to realization of primary purpose of its existence. A high current price also makes essential risks in the case of negative scenario and at the same time limits possibility of growth.

 

Primecoin and Novacoin save an essential potential for growth, but should find their own niche not only in Wikipedia, but in the list of stores, that take the crypto-currencies. Without active usage in this direction, a big stagnation risk will appear in relation of crypto-currencies, XPM and NVC are far from it.

 

FTC develops incrementally, and contains of a little quantity of risk upon key examined parameters, and represents not poor object for investments.

 

Terracoin is still «looking for itself», the currency is really undervalued, and this is its key risk.

Capitalization of TRC is in 3-4 times less than in the nearest analogs, at the same time, crypto-currency doesn’t have essential disadvantages, it should be noticed a generation rate of its blocks. On the official site, the attempts to use TRC for goods and service payment appear, user’s groups try to create additional services. When moving in this direction, TRC can be considered as the most perspective crypto-currency of the list for investment, certainly, using it for diversification of the rest portfolio.

 

General recommendations for security selection.

BTC Hold

LTC Carefully accumulate

PPC Hold

NMC Carefully hold

XPM Hold

FTC Accumulate

NVC Hold

TRC Buy

 

Comment: We judge from the fact that in the future, taking into consideration the success of “paradigm of crypto-currencies” for goods and service payment, at least dozen or two dozens of crypto-currencies will circulate. Maybe, it will happen not so fast, but in the end the redistribution of the part of funds from Bitcoin to other crypto-currencies is evidently, as it happened with LTC. There is one puzzle, one key matter – which currency will be popular? At the moment, we consider that every currency from our list has a chance, but the result will depend on implementers, clubs and investors.

 

Original in Russian: http://investtalk.ru...iz-kriptovalyut

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