It is hard to believe it now, but little over a year ago, the world’s cryptocurrencies seemed to be sweeping all before them.
Prices, measured in “analogue” money such as the US dollar, rocketed. Glowing media coverage suggested that cryptocurrencies were the future and even central banks were rumoured to be getting in on the act, presumably on the basis that if you can’t beat them, you join them.
Then came the great downswing. A perfect storm of problems hit the world of cyber money, and prices came clattering to earth.
Down but not out
Regulators became more intrusive, heavy criticism suggested some “initial coin offerings” were not above board, and what seemed a steady return to “normal” interest rates in the West reiterated the attraction of traditional currencies.
As prices tumbled, long-time sceptics claimed their warnings of a “crypto bubble” had been borne out. Bitcoin, the ‘flagship’ cryptocurrency, dropped from $11,377 on 5 March last year to $3,820 today – a 66% fall in value.
Some feared even worse, in percentage terms, with NEO losing 93% of its value, from $129.58 a year ago to $9.05 today.
Well, cryptocurrencies, as an asset class, may be down, but they are not out. Indeed, there has been a modest rally this year, and one that may augur well for the future.
However, the percentage improvement in recent weeks varies greatly from one cryptocurrency to another, so perhaps one way to sift which cryptocurrencies to buy and which to avoid is to run an eye over the performance of each.
Different approaches to judging currencies
An obvious place to start is by discarding those in which there has been no improvement at all. TRON is in this category. Having dropped from $0.0426 on 28 February 2018, it stood at $0.0272 on 31 January this year and is currently lower still, at $0.02398.
Quantum stood at $0.2058 a year ago and $0.0037 a month ago. It’s possible that it has found its bottom, and remains unchanged now.
Two other cryptocurrencies have seen improvements over the last month, but this is so small as to be negligible. Ripple traded at $0.9589 at the end of February 2018, dropping to $0.3162 by the end of January before rising 1% to its current price of $0.3196.
Stellar failed to live up to its name. Having fallen from $0.3460 on 28 February 2018, it stood at $0.0831 a month ago and is currently changing hands at $0.0852, a 2.5% rise.
Past performance is no guarantee of future performance, but it is probably fair to say that these currencies, too, can be discarded assuming you are interested in the best cryptocurrencies to invest in now – not in some imaginary future.
Next comes Ethereum, which dropped by 85% from the $864 at which it traded a year ago to $106.17 on 31 January this year. Since then it has recovered by 19% to $131.67.
In third place is NEO, whose 93% fall we looked at earlier. But since the $7.20 at which it traded on 31 January, it has staged a 20% recovery.
Our search for the top cryptocurrencies to invest in has now reached the final two contenders in terms of price recovery. In second place is Litecoin, down 77% from $202.12 on 28 February 2018 to $31.17 on 31 January, and now 32% higher at $45.55.
The “winner”, however, is EOS, which dropped by 57% from $8.28 a year ago to $2.25 on 29 January this year, and has staged a 37% recovery to $3.59 currently.
On that measure, looking at the number of percentage points by which the price fall has been reduced by the recent rally, all remain in their current places with the exceptions of Bitcoin and NEO, which trade third and fifth places.
Trying to gauge price momentum and trends is certainly one way to try to pick the best cryptocurrencies to invest in 2019. But there are others.
CoinSwitch, the cryptocurrency exchange aggregator, explores the fundamentals of different types of cyber-money, such as their technology, method of operation and market capitalisation.
Another approach would be to start, in a sense, at the other end to look for what are called ‘network effects’. This expression explains the fact that, as with e-mail and the original telephone systems, the value of something increases the more people use it.
Strong nerves required
Put another way, there would be little value in setting up a parallel e-mail network whose users could not communicate with those on the existing system, so just how many cryptocurrencies do we need?
Finally, you will notice that we have priced all the above cryptocurrencies in US dollars, this being the most common exchange rate in this space. But the more sophisticated may prefer to trade cryptocurrencies that are priced not in dollars but in another cryptocurrency, namely Bitcoin.
In this category are XEM, Steem and Cardano. But remember, you would be assuming the risk of not one but two brands of cyber-money. In what has proved a volatile market, that may require some fairly strong nerves!