Cryptocurrencies in the last few years have taken the investing world by storm. Bitcoin and its ilk have proven to be a truly disruptive breakthrough for online fintech; their blockchain technology, increased transaction speed, and promise of anonymity have all combined to make them attractive to online merchants, consumers, and investors alike.
The perception of crypto as an investment, however, has been that they’re a short-term asset. Crypto is seen as a good way to surf volatility in the markets, with potential for making big gains on quick turnaround. But how does it fare in the long-term? How would an investor stand today, who had bought into some of the more popular coins one year ago? The data at Coinwatch.com can give us some insight.
Bitcoin was the first, the one that started it all. It began as a web wallet payment system in 2009, making use of the then-new blockchain security technology to create the Bitcoin electronic trading token. With nearly $115B in total market cap – just over half of the industry total – Bitcoin is by far the largest of the world’s largest cryptocurrency.
The headlines have come from its performance. Bitcoin hit its all-time high of $19,345 back on December 15 of last year, before starting the long drop to its current level. The real point of interest for the long-term investor, however, comes from the year-over-year data.
BTC stood at $4777 exactly one year ago, meaning that today’s price of $6246 is a 31% gain in twelve months. But look at the right tail of the chart; the price of Bitcoin has been mostly flat – with only one spike at the start of August – since early summer, with only a 1 to 2% variation in the last month. This is the behavior of an investment instrument that has leveled off, although some analysts are starting to ask if Bitcoin is ready to bounce back up as stocks are turning down this week and investors may seek a higher return.
XRP, the payment asset of the RippleNet blockchain network, is the second-largest cryptocurrency traded today by market cap, with $48.41B in funding. Ripple is based on an open-source distributed network, and so offers faster transaction times and minimal fees.
Like Bitcoin, Ripple shows a strong gain year-over-year, having increased 60%, from $0.25 to $0.40 in just one year. A glance at the chart suggests that XRP has not found its level price, however, as it still shows some volatility in the last 60 days. Increased volatility is common for trading instruments showing such a high return. A stronger US dollar may blunt investor appetite, however, as the dollar is generally less risky than XRP’s current volatility.
Of the five cryptos we are looking at right now, Ethereum is the only one besides Bitcoin to have peaked above $1000, and is the third largest crypto by market cap, with $23.49B in backing.
However, Ethereum is also the only one of these five cryptos to show a negative return year-over-year, having lost 36% since last October. Today’s price of $198 is well below the $309 from last October 9.
Ethereum is not without strength, however. The company held a hackathon event this month in San Francisco, attracting more than 1000 coders and developers to gather and work on applications and scaling solutions to apply to ETH’s blockchain network. Ethereum also processes up to 500,000 transactions per second per day, evidence of a robust network capacity that few other cryptos can match.
The largest gainer we’re looking at is Stellar. A relative newcomer to the crypto trading world, Stellar has muscled its way to the #6 spot in the coin rankings by market cap. XLM is backed by $4.63B in real assets, which support almost 19 billion circulating coins and a potential maximum supply of more than 100 billion.
XLM stood at just $0.02 one year ago, compared to $0.21 today. That’s a gain of 950% in one year, a good return in anyone’s book. A look at the chart shows a pattern similar to that which we saw with Ripple: the coin has been falling from its January peak, but the decline is choppier and more volatile than it was for Bitcoin.
Another point to mention: as a newcomer, Stellar started this 12-month period at just $0.02. It had plenty of room for a strong increase in price, while the ‘established’ player, Bitcoin, with a value in the thousands, cannot match the percentage gain despite an absolute gain that is obviously much higher.
The final asset we’re looking at today is TRX, which was launched in the fall of last year as the unit of account for the TRON Foundation, a blockchain based entertainment publication and sharing network. Even though it is the newest of these cryptos, TRX has still acquired $1.71B in market cap, putting it in the #11 spot among crypto currencies generally. The price per coin is still low, however.
TRX launched last September, and last October its value stood at just $0.0025. It’s up to $0.021 now, giving it a 740% gain this past year. Like Stellar, Tronix has benefited from its newcomer status and its low coin price, both of which give it plenty of room to show giant gains.
All five of these crypto currencies – Bitcoin, Ripple, Ethereum, Stellar, and Tronix – show a similar pattern in the last year’s trading. They all stood significantly lower last fall and spiked sharply near the start of the year. Bitcoin led the pack, hitting its peak in December; the rest peaked in January. All five have fallen since then, losing as much as two-thirds of their peak value.
Four of the five, however, show strong gains year-over-year, with returns ranging from 39% to a whopping 1100%. While crypto currency has reputation for producing short-term gains, the facts show that it may make a strong addition to a long-term portfolio.
Author: Michael Marcus