While Bitcoin (CCC:BTC-USD) certainly stole the mainstream headlines with its meteoric run above $60,000, it’s other cryptocurrency assets and crypto tokens that astute investors have really keyed in on. An example of the latter is BitTorrent (CCC:BTT-USD), a popular peer-to-peer (P2P) file sharing platform where its underlying token has made early adopters very rich.
How rich? Well, that would depend on the individual speculator and how crazy they are. But as I write this (you should know that this stat could differ wildly by the time you read this), the year-to-date performance of the BitTorrent token is up 25.5x its Jan. 1 average price.
Also keep in mind that this profitability rate includes a brutal 41.4% loss since its “closing” peak of this year. I’m using colloquial language here as technically, the crypto/token markets never close. Nevertheless, if we calculate the YTD performance to its peak 2021 price, BitTorrent at one point returned nearly 44x.
That’s a condensed version of some of our own Louie Navellier’s absolute best career picks. So you can understand the enthusiasm over BitTorrent. If there’s one digital asset that’s been on beast mode, it’s BTT. But is there room to run for current prospective buyers?
On the surface, it might appear that way. To give a very brief summary, BitTorrent is a token, which is technically distinct from a cryptocurrency. The former is native to its own blockchain and largely used as a digital currency or store of value (i.e., Bitcoin).
On the other hand, developers build tokens on existing blockchains, such as Ethereum (CCC:ETH-USD). Additionally, tokens are typically more utilitarian than crypto coins. According to Bitdegree, people often use tokens to active features of the underlying application or platform.
In a way, you can think of crypto tokens as the physical tokens that some arcade machines requested before consumers can play them. The difference is, some tokens have incredible market value, which is what makes BTT so special.
BitTorrent Is Remarkable, But Continued Upside Is Questionable
Currently, BitTorrent is ranked No. 7 in market capitalization among crypto tokens. Not surprisingly, Tether (CCC:USDT-USD) is ranked first as it allows users to sell their profits in crypto while staying in the virtual currency space.
Now that I think about it, Tether is the perfect example of what a token is. While USDT is pegged to the dollar, Tether itself is not a dollar. Instead, it’s a tokenized representation of the dollar. And it’s incredibly useful because it allows traders to sell their position in dollar terms but not actual dollars (and thus, potentially avoid tax implications).
To keep everyone’s lawyers happy, I do not condone the above. I’m just pointing out why someone might use a token like Tether.
In parallel, BitTorrent has a fundamental argument, as InvestorPlace contributor Muslim Farooque explained. Through blockchain technologies, BTT disrupted the P2P file-sharing industry. On the surface, BitTorrent is quicker, decentralized and more convenient than traditional alternatives. And the BTT token supports the functionality of the network.
Essentially, BitTorrent is part of the broader evolution in the blockchain space, moving from decentralized payment services to sparking various platforms of utility. It’s remarkable. It’s also incredibly risky for the speculator.
While token adherents will probably argue day and night that their asset class of choice is independent of Bitcoin’s market dynamics, the facts state otherwise. Sure, no crypto or token will have a 100% correlation with BTC. But largely, they will have a statistically significant correlation that makes investing in risky tokens like BitTorrent an uncomfortable proposition.
Look at it this way. At time of writing, out of all the cryptocurrencies listed on Coinmarketcap.com, only 10 had a trailing-week performance greater than zero.
You don’t need to perform a Pearson correlation coefficient analysis to figure out the obvious: as Bitcoin goes, so does the rest of the crypto/token complex.
The Outlook Is Negative
Of course, history doesn’t have to repeat itself. BitTorrent and other tokens can finally forge an identity completely divorced from Bitcoin’s market dynamics. If that turns out to be the case, then yes, BTT could be a bargain at the current discount.
But in my opinion, I highly doubt it. In most cases, crypto coins and tokens are completely speculative affairs. Therefore, they need an anchor of stability to latch onto. With Bitcoin gaining mainstream attention, it’s of course the perfect benchmark.
But this is also a double-edged sword. If BTC declines in price, guess what? So do the other blockchain assets. That’s exactly what we’re seeing right now, which makes me very worried about BitTorrent.
On the date of publication, Josh Enomoto held a long position in BTC and ETH.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.