Crypto Picks: Two Ideas For June

Now that the mayhem of May is behind, where do we go from here? For what it’s worth, I believe June will end up looking more like April than May.  Yes, there will be some cryptos performing better than others but a rising market should benefit most.

One reason for the short term optimism comes from the fact that conventional assets like stocks outperformed cryptocurrencies last month even though stocks are 20%-30% overvalued on a historic basis.  

Cryptocurrency assets in total are less than half their December 2017 level.  On a relative value basis, these digital assets are just more appealing. Gen III altcoins like EOS and many other so-called Ethereum killers are getting lots of attention – and they should.

Seems like all the buzz is on the release EOSIO 1.0 on June 2nd. The open source software is a platform designed for building applications that many in the crypto community believe pose the most serious threat to Ethereum. According to reports, the EOSIO 1.0 marks a significant milestone.  Considering the EOS price jumped more than 23% on the news confirms the point.

Of the many Ethereum “killers?” I believe the consensus opinion places EOS as the most serious challenger at this point.  As we all know, this means little in the long term as the crypro world is ever changing. But, at least it offers a measuring stick.

As an investor, if you were looking at both ETH and EOS trying to decide which to get onboard with, take them both. On that basis, let’s start by looking at the price action.

Top Performers in May

Comparing price performance in a bullish climate is always fun because, in general, everybody is a winner.  In down markets there are only relative winners. These are represented by the assets that lost the least in value.

However, relative performance is what investing is all about. If you lose less money than the next guy, you come away from the contest with more buying power.

The performance of ETH and EOS during May is a case in point.  The price of ETH dropped 16% to end May around the $572 mark. EOS on the other hand closed around $12. That represents a drop of 28% and nothing to brag about. However, this was a standout performance among the Gen III cryptos.

Yes But . . . .

So far we have not addressed the question, will EOS mark the death of ETH?  The honest answer is that nobody knows with even 60% certainty. In the longer term picture, my guess is there will be plenty of room for both.  That is just one reason for owning both.

Ethereum’s Buterin Makes Bold Prediction

Ethereum has delivered far more than any Gen III crypto but has probably done less to promote itself than it should.  For example, there was ETH founder Vitalik Buterin at a recent developer conference declaring the current network “screwed” when it come to scaling.  That was not exactly a gift to investors. Talk may be cheap elsewhere but braggadocio is part of the crypto game.

ICOs need only to produce whitepapers and promises. By Buterin’s own assessment ETH is only about 30% of its way to meeting it goals.  The issue of scalability is one of the biggest today and over the next several years.

Buterin chose the recent OmiseGO AMA session to explain how second-layer solutions that Ethereum is testing on Ethereum testnet could enable the network to support large scale applications consisting of millions of users that required high speed transactions.

This is a very strong statement that goes into more specifics regarding Sharding or Plasma solutions than any we have heard.

He added that for the blockchain to support large-scale payment networks such as Visa, stock markets like Nasdaq, and Internet of Things (IoT) networks, it will have to process hundreds of thousands of transactions per second.

Buterin’s remarks were timely for OmiseGO.  This well funded project comes from a south Asian based company is built on the Ethereum network and aims to be a decentralized payment platform for retailers with the aim of disrupting more traditional payment processors.

OmiseGO is a solution to fundamental coordination of payment processors, gateways and financial institutions. The goal is to allow the user to share funds without needing a bank account and without incurring fees or cross-border processing costs.

Omise aims to sign up retail partners to accept the payments and also build a platform, which other payment providers can use as well. In other words, OmiseGO aims to be the Visa of Asia.  That is aiming high and a fundamental plus for Ethereum.

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.