It’s been over 20 months for the cryptocurrency market, even taking into account the crash that happened at the end of last week. From the pandemic trough of March 2020 to December 4, 2021, the global value of digital currencies has increased more than 15 times to reach $ 2.3 trillion.
Although the two big ones – Bitcoin and Ethereum – receive a large portion of the credit for these nominal gains, they are coins Shiba inu (SHIB 3.59% ) and Dogecoin (DOGE 2.27% ) that came out of nowhere to become the top 10 marginal tokens, in terms of market capitalization.
SHIB and DOGE have soared, but both are on the verge of massive setbacks
Shiba Inu is the undisputed dropper in 2021. With a symbolic price close to $ 0.000036 at the end of the evening on December 4, Shiba Inu had brought in more than 49,000,000% since the start of the year. This means that investors who put their money into SHIB at midnight on January 1 would now be millionaires for less than the price of a cup of coffee.
The gains for Dogecoin have also been impressive, although not on par with the Shiba Inu coin. DOGE tokens have gained nearly 9600% since benchmark S&P 500 bottomed out on March 23, 2020. Comparatively, the S&P 500 is up just over 100%.
While there has been insatiable hype behind Shiba Inu and Dogecoin, and their respective investor bases firmly believe that both coins have a future, the story suggests that they are heading for an epic reversion.
When I looked at the performance of payment coins that gained 24,000% or more over a 10-30 month period, I found that they all lost 93-99% of their value once they had reached their peak. Shiba Inu peaked at a gain of 121,000,000% in 2021, while Dogecoin was over 27,000% higher at one point in a six-month period. Even with SHIB and DOGE respectively 59% and 76% below their all-time highs reached in 2021, it’s pretty clear that the two still have a long way to fall.
The icing on the cake is that none of these parts offer anything that looks like competitive advantage or generalized utility. With tens of thousands of blockchain projects in some stage of development, there is simply nothing in either coin to suggest that they will be long-term winners.
This crypto duo may overtake Shiba Inu and Dogecoin in 2022
But as Shiba Inu and Dogecoin lose their luster, other coins with real potential are expected to hinder them and potentially take their place in the top 10 or marginal top 10. Here are two digital currencies that could realistically end in 2022 with larger market caps than SHIB and DOGE.
The first cryptocurrency that can surpass the two ultra-popular meme coins is Algorand (ALGO -0.08% ). To give an idea of the current state of affairs, Dogecoin has a market cap of $ 23.2 billion, Shiba Inu rings at $ 19.9 billion, and Algorand has a market value of around $ 10.2 billion. .
With over 15,000 cryptocurrencies listed on CoinMarketCap.com, differentiation, competitive advantage, and real potential are what will separate winners from a sea of hype in the near term. In Algorand’s case, he has three important factors that should allow him to be successful in the long run.
For starters, its unique blockchain consensus mechanism is an improvement over traditional proof of stake. This mechanism, known as pure proof of stake, randomly and secretly chooses small groups of ALGO hodlers to vote on proposals and come up with blocks. With this randomization in place, the Algorand developers have effectively eliminated the possibility of small groups of hodlers disrupting the network.
Second, Algorand is fast. A quick check of its key metrics last weekend revealed a transaction finality of 4.39 seconds and the ability to process 1,152 transactions per second (TPS). Compare that to Shiba Inu, an ERC-20 token built on the Ethereum blockchain, which is limited to 13 TPS and takes around six minutes to complete a transaction.
But the third and most important aspect of Algorand is the developer focus on blockchain interoperability. With many companies developing a single blockchain, there is a real possibility that they will not work with each other. Algorand is developing solutions that will allow the networking of different blockchain technologies. This makes Algorand a good bet to be a success with the business world.
The furthest from this duo, based solely on market capitalization, is Stellar (XLM 3.75% ). Last weekend, Stellar’s market value was $ 6.9 billion, placing it 27th on the list of the world’s largest digital currencies.
Stellar represents all that is good in the development of blockchain technology focused on finance. With the existing payment infrastructure, validating and settling a cross-border payment can take up to a week. With Stellar, the fiat currency is converted into the protocol token of the Stellar blockchain, XLM (known as Lumen), transferred to its destination, and converted back to the fiat currency of its choice. This process can be completed in four to five seconds on average.
Another advantage that gives Stellar an advantage over the vast majority of its payment network competitors is the cost of carrying out these transactions. Sending money from point A to point B with Stellar costs 0.00001 Lumen. With Lumens trading at $ 0.28 over the weekend, the actual cost of a cross-border transaction is only $ 0.0000028. In other words, it would take roughly 357,000 transactions before users accumulate $ 1 in fees. Compare that to the wire transfer fees that financial institutions can charge for cross-border payments and you will quickly realize the benefit that Stellar’s finance-driven blockchain brings to the table.
The exceptional speed and low cost of Stellar’s blockchain has already led to some intriguing real-world partnerships. This includes working with IBM and a dozen banks in the South Pacific region to test cross-border payments four years ago. He also directed Tala and Visa partner with Stellar with the aim of expanding financial blockchain solutions to emerging markets.
Stellar and Algorand may not offer the social hype of Dogecoin or Shiba Inu, but they are two projects with a clear path to real-world relevance.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.