Compound, Elrond: 2 Cryptos With Liquidity, Critical Mass And High Risk Potential
Andy Hecht | Jul 29, 2021 13:38
This article was written exclusively for Investing.com
- Cryptocurrencies make a move on July 26
- Wealth creation remains a powerful magnet for the asset class
- New milestone in the asset class on July 22, 2021
- Compound: 49th leading crypto with an over $2.0 billion market cap
- Elrond ranks 57th with an over $1.6 billion value
I am a sucker for quotes as they appeal to my quest for literary growth. Elon Musk provided a truly noteworthy quote at the B-word conference last week when referring to his stream of tweets about Bitcoin and Dogecoin:
“I pump but do not dump.”
That's my candidate for the quote of the year.
I’m pretty sure it sent chills up the spines of attorneys at the companies Muks is affiliated with—Tesla (NASDAQ:TSLA), SpaceX, and the Boring Company, where he serves as the “Technoking.” Moreover, it likely raised the hackles of market supervisors and was fodder for lots of activity and discussions within the halls of the SEC, CFTC, and other regulatory agencies. It could also have helped provide a lift to a variety of crypto assets in the past few days.
Elon Musk is a genius and a character. He's also a disruptor and a thorn in the side of many regulators and government officials. He obviously relishes walking a fine line. In many ways, he has become a sitting duck but with impenetrable armor since he's the world’s third-wealthiest individual he has a net worth of over $163 billion. One thing for sure, he's one of a kind, still willing to rock the boat and challenge the status quo.
In or around 2010, Bitcoin began the cryptocurrency revolution. Since then, the evolution of the digital currency asset class has led to many competitors and compatriots in the sector. Compound (COMP) and Elrond (EGLD) are two examples of top-tier cryptos that have a lower profile than some digital asset peers. The founders and holders of these cryptos would love to capture Mr. Musk’s attention since he seems to provide some of the best PR available in the asset class.
h2 Cryptocurrencies make a move on July 26/h2After trading in a tight range between $28,800 and $36,650 from June 21 through July 23 and trending mostly lower, Bitcoin exploded higher to over the $40,000 level on July 26.
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Source: CQG
The daily chart highlights this week’s spike higher in Bitcoin. Bitcoin was around the $38,000 level on July 27, though it's trading above $40,000 at time of publication.
Source: CQG
Ethereum futures moved from $1715 on July 20, exploding to over the $2400 level on Monday, July 26. It was trading at the $2240 level on July 27, hovering around $2,344 at time of publication.
Clearly, cryptos are back in play. That will likely unleash their magnetic powers.
h2 Wealth creation remains a powerful magnet for the asset class/h2Nothing makes an asset more attractive than the opportunity for investors and speculators to turn a small amount of capital into a fortune. At $40,000 per token, a $10 investment in Bitcoin at five cents in 2010 is worth a cool $8 million.
While few had the foresight to throw even $1 at Bitcoin eleven years ago, their story is a powerful force for the asset class and wealth-hungry investors.
Another rally from the recent lows in all of the cryptos will only reignite the speculative fire that comes from humans’ greedy impulses.
Bull markets feed on themselves. And parabolic markets create feeding frenzies.
h2 New milestone in the asset class on July 22, 2021/h2In 2010, Bitcoin was the only cryptocurrency. Last week, the number of cryptos floating around in cyberspace rose to over 11,000, an incredible number.
It's hard to point to any asset class with over 11,000 assets. The Wilshire 5000 includes all the stocks from the US stock market. The New York Stock Exchange is the largest in the world. Approximately 2,800 companies trade on the NYSE. That's still nowhere near the current number of cryptocurrencies.
The 11,000 milestone in the cryptocurrencies asset class contains many cryptos destined for failure. After the latest rallies in Bitcoin and Ethereum—which took the overall market cap to the $1.496 trillion level—the market valuation of cryptos was still well below Apple’s (NASDAQ:AAPL) market cap.
Only 57, or around 0.52% of the asset class’s members have a market cap over the $1.5 billion level. Compound and Elrond are in the exclusive top-tier cryptocurrency group.
h2 Compound: 49th leading crypto with an over $2.0 billion market cap/h2Compound (COMP) is a decentralized, blockchain-based protocol that allows participants to lend and borrow cryptocurrency assets. The native token is COMP. Compound’s website describes it as an:
“Algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.”
On July 27, COMP had a market cap of $2.074 billion at $387.78 per token; at time of publication it was trading higher, at $394.84 per token with a market cap of $2.14B.
Source:
The chart shows the 49th leading cryptocurrency has traded as low as $64.64 and as high as $854.48 since mid-June 2020. COMP was less than half its 2020 value at its high in May 2021, but the price recovered from a low of $221.85 on June 20 to this week's $388 and now almost $395 per token level.
h2 Elrond ranks 57th with an over $1.6 billion value/h2Elrond (EGLD) is a software that seeks to incentivize a distributed network of computers to run a smart contract platform, prioritizing scalability and lowering transaction fees. Elrond’s website states:
“Developers, validators, and businesses use Elrond to build a new internet economy.”
While the token is eGOLD, therefore 'tickered' EGLD, it has nothing to do with the yellow metal, as it only uses gold as a branding device.
As of July 27, EGLD had a $1.628 billion market cap at $85.42 per token; at time of publication it was trading at $86.39 bringing the market cap to $1.65B.
Source:
Since September 2020, EGLD has traded at a low of just under $7.20 and a high of $243.40 per token. After reaching a low of around $63 in early June, the price has recovered—to over the $85.42 level on July 27 and over $86 on July 29.
COMP and EGLD have the critical mass that creates liquidity for investors and traders. However, even though both are top-tier cryptos and members of a club that under 0.52% of the asset class belongs to, they carry the same high risks as all other members.
Risk is always a function of potential rewards in any market. In cryptos, the risk is the total value of the token given the incredible potential for wealth creation, and COMP and EGLD are not exceptions.
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