Bitcoin or Altcoins: Which Is The Best Choice

In the beginning, there was Bitcoin and all that followed were deemed to be heretics and called by the name Altcoins.  As thus it was. By the end of the year 2017 AD there were 1,386 heretics posing under the names of Ethereum, Litecoin, Ripple and many more that followed in pursuing their vision of the holy grail.  

Passing through the biblical abyss, we are now in the present world of 2018 when a new testament is being written.  The question that must be answered is this. With the price of literally all cryptos having been slaughtered like sacrificial lambs, do you place your beliefs in bitcoin or the heretics?

We can make things a bit easier by putting Ethereum, LTE and XRP into the same group as bitcoin.  In fact the whole point of doing this is to address the question that is frequently being raised these days.

If you already own crypto and living with the frustration of seeing bitcoin tumbling from its near $20,000 high, you are probably inclined to bury your head and ignore the question all together.  Please resist the temptation. Later on you will be happy you did.

Value Can Be A Sucker Bet

Lately, I have been reading more articles featuring what I would call the most depressed priced list from the group of 2017 ICOs.  There is no question that fortunes were made by smart investors who played this strategy last year. Most of these guys are long gone.

Just take the case of ZClassic whose price when from a low of just under $0.40 to nearly $206.00 in the course of about a year.  That is a better investment return than even the 2017 crypto big performers like Ethereum at over 7,500%! Since January, owners of ZClassic have seen the price drop to around the $8.00 level.

So taking ZClassic and bitcoin and looking at these two in a microcosm, the question is which is a better investment from here?  Here is an easy answer. If both return to their previous high levels, bitcoin will about double in value while ZClassic will be worth 26 times it’s present value.  Expressed in a slightly different way, $10,000 invested in bitcoin would become about $20,000 whereas, in ZClassic becomes $257,500: Hmmmm!

In our example, we chose ZClassic for the simple reason is that its business actually is comparable to bitcoin.  For those less familiar, ZClassic started as a fork of Zcash in November of 2016. Zcash is a cryptocurrency that is aimed using cryptography to provide enhanced privacy of its users compared with bitcoin.

This is what makes our example a real challenge to make the right choice.  I do not own either one of these so have no dog in this fight but the risk reward favors ZClassic.

Now For The Real Test

When we make real life choices comparing bitcoin, Ethereum, Litecoin and Ripple to the better then 1,386 ICOs of 2017, the difficulties multiply exponentially.  The first three have each lost 40%-50% of value from their highs. Only Ripple has fallen far more than the others.

It is a safe bet that the average Altcoin has lost much more than half their value.  The average loss is probably mirrors that of ZClassic. So what is the right choice? Finding the answer is why there are so many people interested in making recommendations.  I would advise against the temptation. These days you need to know the source of your information. There is a lot of bias. The reward is most likely not worth the risk. Here is why.

The next move up in prices will the lead by the big names like bitcoin followed by Ethereum and Ripple.  This is not a unique idea but simply applying common sense. If you want to play the Altcoin price recovery cycle keep in mind that many of the ICOs were pre-venture capital companies that have no operating history and many are pre product.  

In the past, entrepreneurs at that level typically raised capital from friends and family.  In other words from people who never expected to get repaid. So while the rewards of playing this strategy may be as attractive as ZClassic, the risks are infinitely higher.

In the days ahead, we will be keeping an eye out for ideas exceptional cases to the average ICO.

Featured image courtesy of Shutterstock. 

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.