Currently cryptocoin prices continuously maintain both up and downs. Honestly the trend seem to be in bear market. Therefore, Many wonder when altcoin season start. This is because a considerable investors see the real value in altcoins that have huge potential to yield and novel technological structure. It is sad but true that many preditions about altcoin season is just a speculation. However, it is more important to figure out which coins prices follow an altcoin season upward trend.
Altcoin Season can be started by Ethereum
Ethereum. Obviously. But I’ll give you two “runners up” and two that I think won’t make it. Also, I’ll assume that by “long term” you mean 5 to 10 years from now. Let’s start with the base case.
There is a scene in one of the earlier seasons of Game of Thrones that illustrates my argument.
Jora and (I think) Tyrion are watching a large man fight a small one in an arena and they take bets. Eventually, the large man crushes the smaller one (Tyrion loses). Jora remarks that he always bets on the big guy for that reason.
If you’ve seen the show, it plays out just like that in season 4 with this dual.
The lesson for investing is similar. Most of the time the obvious play is the right one. Yes, we all love an underdog, we love stories where David beats Goliath, but those stories are only remarkable because they are comparatively rare.
In the cryptocurrency world, the “Goliath” of Bitcoin competitors is Ethereum.
It was the first platform coin in the world—literally reversing the idea of Bitcoin. Rather than have blockchain power a coin, make the coin power a blockchain. That way, the blockchain is freed up to run other applications on top of it.
As a result of its architecture, Ethereum hosted the first ecosystem of related coins that run on it. Presently, some 90% the world’s distributed applications run on ETH and everyone else, competitors included, are forced to build bridges from ETH to their tokens.
For example, that’s what bridge.terra.finance is for: it moves your ETH coins onto Terra.
Right now, ETH has a market cap (= total number of coins * price) of about $400 billion. Bitcoin stands at just under $900 billion. At its height, Bitcoin reached about $1.4 trillion (in April of 2021).
ETH would have to do 4x to flip Bitcoin’s all-time high. It’s not that much, especially considering that most of the world’s crypto applications run on it.
Like Bitcoin, Ethereum has also been designated “likely not a security” by the Securities Exchange Commission (SEC) in the United States. This means that ETH presently enjoys a regulatory advantage over all possible competitors.
- Ethereum enjoys first-mover advantage (as a platform).
- Ethereum hosts the largest decentralized application ecosystem.
- Ethereum is already quite close to Bitcoin in market capitalization.
- Ethereum enjoys a regulatory advantage that no competitor has (and only Bitcoin shares).
- Ethereum enjoys the most brand recognition after Bitcoin.
- Competing coins have to build bridges through Ethereum to get traction.
Most of the time, Goliath wins.
Two Runners Up of the season
Continuing with the anti-romantic theme that the obvious plays are also the most likely ones, my next two picks are Solana (SOL) and Terra (LUNA). They are both strong candidate of the altcoin season.
Because they have both already solved the problem that plagues Ethereum. Look, we’re only having this discussion because Ethereum’s network is too slow. It does 25 to 45 transactions per second (TPS) and it needs to be able to scale to at least 10,000—as a layer 1 solution.
(Note: coins like MATIC are layer 2 solutions that build on top of the base layer to make the network go faster).
Solana can already do 50,000 tps (though it was recently flooded with bot exploits that swamped the network with 300,000 tps requests).
LUNA can already 10,000 tps.
Other “fast” competitors, like Algorand, can only do 1000 tps.
Additionally, Solana and LUNA both have functioning decentralized finance ecosystems and they are building those out.
Here’s LUNA — the image is a little old since SPEC is LUNA’s yield farm aggregator.
A caveat about Binance—it’s super centralized and doesn’t have much of a roadmap to change. It’s synthetic platform, Linear, is still in development too.
Likewise, Polygon (MATIC) is a layer 2 solution on Ethereum, so it’s not really a competitor.
Avalanche (AVAX) just doesn’t have a fully functional ecosystem yet.
- Solana and LUNA have solved the problem that is stopping Ethereum from swallowing the world. They have until the end of 2023 to steal away enough of Ethereum’s market share (that’s when ETH will finish fixing its main speed problems).
- LUNA and Solana are the only two coins that have solved this problem which also have functioning ecosystems already.
They are the dead obvious competitors to Ethereum. Notably, all three could flip Bitcoin in market cap 10 years from now.
Ripple’s coin, XRP, is a single-use case coin. It does not support a platform but is intended to be Bitcoin for banking uses. It’s been around forever, and I think that it’ll beat its SEC charges. Still, it’s just old tech relative to Ethereum, SOL or LUNA. It’s like comparing a calculator to a desktop.
Cardano is a project that I like and understand. Its process of peer review for implementing protocols makes me, as a university professor, happy. It’s also just now turning to the problem of speeding up its network (see image below).
Their solution for attracting developers is that everyone will migrate their coins across from Ethereum. But the Cardano blockchain isn’t faster than ETH presently and it’s not clear that it’ll finish before ETH finishes upgrading.
I won’t address Polkadot (DOT) much here because its market cap is below SOL’s—and rightly so. They are still working on speed and can’t easily have people migrate their coins like Cardano plans.
- These coins are either old technology or technology that won’t reasonably be ready by the time that Ethereum finishes its upgrades.
- How will they possibly beat coins that already work or Ethereum, which is already ahead in speeding up?
Altcoin Season Concluding Thoughts
I hope I’ve made clear why I think that ETH, SOL, and LUNA are the best candidates to attract long-term growth.
Some basic projections follow. Suppose that the leading platform coins, ones that support every other coin in the world, are 3 in number and that their combined market capitalization is equal to the amount of US dollars presently in circulation (US M2). Then they’ll split a $21 trillion pie.
It won’t be an even split. So, let’s use these numbers and assume fully diluted market caps (since this is 5 to 10 years out).
- Ethereum: $9 trillion = 20x return
- SOL: $6 trillion = 85.7x return
- LUNA: $6 trillion = 173x return
I perceive, in short, quite a bit of mispricing in the present market. Still, a lot can change over the next 5 to 10 years, so these are more like approximate guesses.
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