We haven’t seen much in the way of brand-new cryptocurrency newsletters in the past few months… which is probably understandable, since so many of the hot ideas that the early opportunistic newsletters had us salivating over in December and January lost 90% or more of their value when the air suddenly floofed out of the crypto-token bubble.
So I was a little curious to see what the enthusiasts are touting now — there remain just about 2,000 different coins tracked by CoinMarketCap.com (I remember being bewildered when it went over 100 maybe a year ago), and there are quite a few biggish ones (as of this moment, you have to go down to number 17 on the list before you find one that has a smaller “market cap” than a billion dollars, and all the top 100 have nominal values of at least $50 million each.
Whether those numbers mean anything real or not in the end I can’t tell you, but it at least means that people are ascribing value to a lot of different altcoins — whether it’s because they like the technology, want to somehow buy a piece of “the future,” have particular insight into one coin over another, or just like trading and betting these semi-anonymous tokens that they don’t really know anything about, I don’t know. I suspect it’s mostly “maybe I’ll get lucky” speculation and momentum-chasing trading, since there’s always a market that appeals to that kind of behavior (many of those crypto-chasers moved on to the marijuana stocks, but not all of them), but it’s equally true that there are a lot of true believers in blockchain who think this is like renting out your garage to Steve Jobs and Steve Wozniak. So who knows.
And Doug Casey, who has long adored speculation, particularly in mining stocks, is launching a new cryptocurrency/blockchain newsletter helmed by a guy named Marco Wutzer — it’s called Disruptive Profits ($1,595 up front, no refunds, autorenews after two years at $2,000/yr), and the real headline tease is that he’ll reveal the next bit winner in a special report called, “The New Ethereum: A Second Chance for 100X Gains.”
Here’s what Justin Spittler, who actually signs the ad letter, says about this:
“I can tell you with total conviction: This coin has the potential to replace Ethereum. And yet, it’s 1,000X smaller. I think you’ll agree it won’t stay that way for much longer….
“And while hundred and multi-hundred-bagger winners are rare, there’s no other place in the market with this kind of potential. In fact, I believe the next 100-bagger opportunity is one little-known coin insiders are loading up on right now.
“At last count, 32 VC’s have poured in more than $20 million. In just six months.”
There are even some creepy celebrity event photos with a younger Marco Wutzer standing next to Pink and Alec Baldwin, for some reason… and they establish his bona fides by saying that he was an early investor in eGold and other digital currencies in the pre-bitcoin era and made a fortune in crypto and traveled the world setting up cryptocurrency investments. I don’t know anything else about him.
And they’re positioning this newsletter as a “buy and hold” cryptocurrency newsletter — more like a venture capital model, less like a trading service because “traders get killed.”
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The ad also cites some huge gainers in the crypto world…
“Like Stratis, which has risen 8,800% since January of last year.
“Spectrecoin, which has risen 2,150% since then.
“And Augur, which is up 1,269% over that same period.”
I suppose those numbers are probably accurate, if you pick the right day, but, of course, those projects barely existed in January 2017 and were priced at fractions of a penny — if you had bought anytime after anyone had heard of them or they became available on any exchanges, even as recently as May of 2017, you would have lost money if you held until today (though they all did go up 10X in value or so during the crypto bubble into December and January last winter before giving up all those gains).
And this new idea is marketed as “the next ethereum,” so first they have to explain that a little…
“Contrary to popular opinion…
“The single biggest force in advancing blockchain technology is NOT Bitcoin.
“Rather, it’s a digital currency called ‘Ethereum.’
“If Bitcoin is like email…
“Then Ethereum is like the Internet.”
And a bit more that…
“Ethereum is the greatest force in building out the blockchain.
“That’s why over 300 global businesses have joined a group called the Ethereum Enterprise Alliance….
“Ethereum’s importance and size is actually vastly understated!
“All told, there are 496 different cryptocurrencies built on Ethereum’s technology.”
Which brings us, of course, to the tease about this “new ethereum” ….
“And the real future of this space, and big opportunity for you, is in what Marco calls
the ‘New Ethereum’…
“The original Ethereum has risen 41,000% since it launched back in 2015.
“The ‘New Ethereum’ can do just as well, if not better.”
One significant impediment to actually using cryptocurrencies in anything practical, we’re told, is transaction speed — both bitcoin and ethereum have had periods of time when transactions took half an hour to finish even when the network wasn’t buried in some sort of crisis, and hours or days at tough times… and it always takes substantially longer than credit card transactions, which is important for “transactional” type cryptocurrencies because credit cards are the gold standard of payment technology networks at the moment.
So lots of the new cryptocurrencies are designed to speed things up and make transactions much more efficient, without losing the potentially low-cost and high-security aspects that make blockchain appealing. So it won’t surprise you to hear that this “new ethereum” is being touted because of its speed….
“New Ethereum is on pace to be 5,000 faster than Ethereum!
“Ethereum can process 20 transactions per second…
“Paypal handles 193 per second…
“Visa can process 24,000…
“and Mastercard can handle 38,000….
“Now, look at the New Ethereum.
“It has the potential to process a whopping 100,000 transactions per second….
“It even has plans to reach 1 million transactions per second.
“That’s 41-times more capacity than VISA.”
OK, so we know that “potential” is not the same thing as reality… but still, that sounds pretty impressive.
The other clues indicate that this “token” has a “market cap” of something in the neighborhood of $25 million (1/2880th the size of Uber is the hint they drop, and Uber’s about $74 billion last I checked… and the “ethereum is 100X” larger puts it in this category, too, with ethereum’s “market cap” at about $23 billion now).
And we also get a “catalyst” that provides another clue:
“What’s facing us right now is a key deadline…
“While no official date has been set, ‘New Ethereum’—with its VISA crushing potential—is expected to have its ‘mainnet’ release.
“Up to this point, its core technology has only been in test phase.
“The ‘mainnet’ release means its technology is going LIVE—to the general public.”
Well, what is it? As I implied above, I’ll have to resort to guessing to some degree and can’t be 100% certain, but the Thinkolator sez our best match here is QuarkChain (QKC), which had its ICO this summer, is indeed a faster transaction network based on ethereum, and otherwise matches the limited clues fairly well.
You can see the ICO analysis of QuarkChain (QKC), from someone who undoubtedly understands the crypto marketplace better than I do, at Hacked.com here.
So how do those clues match? Well, about $20 million has been invested — $16 million in a private sale, $4 million in the ICO. Don’t know if that was by 32 VC firms or not, and that reference in the ad might have been to all of the cryptocurrencies he’s recommending as a group, but there are certainly a lot of VC/Hedge funds in the crypto space.
And it is poised for a mainnet release in the fourth quarter… which starts on October 1, though I have no idea whether it will actually take place on that first day of the quarter.
And the speed comparisons match — they say they’re getting about 2,000 transactions per second, with a design that they think can get them into the millions.
QuarkChain is essentially a new peer-to-peer transaction blockchain that solves the speed problem by hiving off transactions into a second layer and then re-confirming them with the original blockchain layer. At least, that’s how I understand it, so it’s probably far more complicated — they call this “sharding,” and there are other technologies who use this concept… I have no idea which one might be better, and a lot of the fairly large cryptocurrencies are also trying to tackle this same “transactional throughput scalability” issue with different designs and technologies.
Here’s how QuarkChain describes itself in their white paper:
“Recently, distributed ledger technologies — decentralized and trustless blockchains (e.g. Bitcoin, Ethereum), have started rewiring the nature of our current economy, communications and knowledge. As the global financial transaction volume in all electronic payments grows, the low capacity of the current blockchain-based networks cannot cover the world’s commerce anytime. However, a simple pursuit of scalability usually sacrifices decentralization and security. Therefore, the ultimate goal of blockchain is to extend the scalability as high as possible while keeping security and decentralization in an appropriate level.
“QuarkChain is an innovative permissionless blockchain architecture that aims to meet the global-wise commercial standard. It provides a secure, decentralized, and scalable blockchain solution to deliver 100,000 on-chain TPS.”
You can read the whole thing here, it’s relatively detailed and understandable compared to a lot of the cryptocurrency white papers I’ve seen. There’s even a “risk factors” section, which is good to see and probably important for prospective investors to read.
So… will this be the next big deal in cryptocurrencies? Will there, in fact, be another surge in crypto-token prices? I have no idea, I still consider all cryptocurrencies to be interesting technologies that don’t make a lot of economic sense as investments — they are driven by either “scarcity” that supports some value as an “asset,” in the case of bitcoin, or, in most others, as speculations on the future value of a peer-to-peer network technology where there’s no particular “earnings” to speculate on and no “ownership” of the network given to the token holders.
The only real way I can make sense of the value of a crypto token is by starting in the future and working backwards, because the only real “earnings” done in these networks are the tokens earned by miners for doing the calculations that verify and endorse transactions and therefore make transactions secure and possible. So to guess what a token is worth today, I would have to estimate what it would be worth to the miners who earn those tokens in the future as payment for enabling the network, and then walk that back to say that if those miners see value in the future for these tokens they earn, what is an identical token bought today worth?
Which is why I don’t buy them, because that’s super-speculative even for a very established cryptocurrency like ethereum, and for most others seems akin to buying a junior mining stock when the miner sort of knows where they’re going to dig, but doesn’t yet own the land and isn’t sure which metals they’re looking for or what they’ll be worth. The fact that it might work out doesn’t mean the probabilities can be assessed in any rational way… at least for me.
Your mileage may vary, of course, and perhaps you enjoy analyzing and comparing cryptocurrencies, or just like the action of trading them — there’s no shame in that, cryptocurrency trading is, I think, the most sincere expression of speculative psychology you can find in the financial world, so it’s probably a great arena in which to test technical trading strategies without any distraction from fundamentals like earnings or cash flow or quarterly reports (or even, in many cases, press releases).
We’re also teased that Marco likes a few other cryptocurrencies, and we don’t get hints on most of them… but one is probably fairly relevant to your analysis of QuarkChain… this is what he says:
“… another is addressing the same scalability issues as the New Ethereum—and is probably its biggest rival.
“(Marco definitely thinks the New Ethereum will emerge the winner… but just like you have Amex, Visa, and Mastercard… there’s room for more than one player here.)”
My guess on that one is Zilliqa (ZIL), another fairly recent ICO that is developing a high-throughput system that also uses sharding. Their white paper is a little harder to understand, but they do have a “position paper” that’s a little clearer for us non-experts. They aim to release their “mainnet” for use in December or January, but while QuarkChain is definitely a guess I’d have to categorize this as a “wild guess.”
So I’ll leave you there, with some guesses as to the tokens Marco Wutzer is recommending for that new Casey newsletter… and my personal misgivings about figuring out what a rational price for any of them could possibly be. If you want to dabble in these or other cryptocurrencies, you’ll probably have to get out of the happy little Coinbase sandbox and go to a larger exchange, and different exchanges support trading in different tokens and often have different pricing, particularly for some of the smaller and low-volume cryptocurrencies — one resource I’ve used to find out where tokens are traded (and at what price and volume) is CoinGecko, and you can find their Zilliqa page here and QuarkChain page here if you’re interested in that kind of info.
(If you want to dip your toe into crypto-world and reward your friendly neighborhood Gumshoe, by the way, you can check out Coinbase using my referral code and you and I will each get a little reward — I think it’s $10 worth of bitcoin right now… I’m not arguing that Coinbase is the best way to buy or hold bitcoin or the other big tokens, and I wouldn’t dissuade you from using some other exchange, service or wallet — Coinbase was just the service that I found easiest to handle and I trust their system with some of my money.)
I’m sure we have plenty of cryptocurrency traders out there in Gumshoeland, and I’m happy to learn — so if I’m missing something important here, or if you’ve got other ideas for this tease, or other favorite cryptocurrencies that you think will become important and valuable, well, by all means use our friendly little comment box below to share those thoughts with us. Thanks for reading!