Trading Tip: Sound Technology, Not High Valuations

The highs and lows of the cryptocurrency markets fringe on lunacy. They expose volatility as well as uncertainty. Yes, blockchain technology is stable, viable, exciting, robust and here to stay. But when a slew of coins start to double and quadruple in price within a week, alarm bells sound. Is this a joke? Are these companies really worth all these billions?

The co-founder and former CEO of Ethereum, Charles Hoskinson, has issued a warning about all-time highs reached by several altcoins since the start of the new year.

In an interview with CNBC, Hoskinson said, “What’s going to occur is a lot of these ventures that don’t have strong fundamentals, don’t have good tech, or just unrealistic projects, they will eventually run into some major wall they can’t quite overcome.”

Imagine riding a bull run on an altcoin that bills itself as the next Bitcoin with outstanding privacy features, fast transaction speeds and negligible fees. It also has all the bells and whistles of Ethereum. It features smart contracts, and it will be the next big platform for developers. A large stake in the project could register massive gains, as the coin performs well among investors.

Suddenly $100,000 of [yourfavoriteproject]coin has no liquidity and no one wants to trade it. And it’s not the only cryptocurrency on the deadcoin trajectory.

Hoskinson added, “They will fracture up and you will see a lot of them are certain to fail.” Timing the failures and divesting from unsuccessful projects will remain extremely challenging. “The problem is a lot of them have a lot of money,” Hoskinson said. “It’s really hard to fail when your burn rate is $5 million or $10 million a year, and you have $1 billion of capital.”

Hoskinson, who now heads IOHK, a blockchain research firm, speculates on consolidation following a crash.

Altcoins that have surged in recent weeks with astonishing gains include Cardano, Augur, Ripple and Dogecoin, among others. Several founders have expressed concern over high valuations.

Founder of Dogecoin

https://twitter.com/ummjackson/status/949313802994008064

Founder of Litecoin

Ok, sorry to spoil the party, but I need to reign in the excitement a bit…

Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can't handle LTC dropping to $20, don't buy! ?

— Charlie Lee [LTC?] (@SatoshiLite) December 11, 2017

Founder of Ethereum

*All* crypto communities, ethereum included, should heed these words of warning. Need to differentiate between getting hundreds of billions of dollars of digital paper wealth sloshing around and actually achieving something meaningful for society. https://t.co/aNpEnBNGsA

— vitalik.eth (@VitalikButerin) December 27, 2017

Note: The goal of our Crypto Coin Index project is to create an easy resource webpage for newbies and anyone who plans to invest in cryptocurrencies. We’re aggregating the best links to create a space where anyone can quickly discover what a project is, how it’s progressing, and how likely it is to succeed. We cover comparisons on Google Trends with links to calendar events and white papers. Learn the fundamentals and keep abreast of the roadmaps to minimize your risk while supporting the blockchain projects of the future.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.