At the beginning of May, Medina Spirit strode off in the Garland of Roses after winning the Kentucky Derby. However, before spectators had time to nurse their mint-julep hangovers and receive their seersucker suits back from the dry-cleaners, the victory was cast into doubt. A steroid test failure by Medina Spirit after the race has the potential to undo everything.
In other words, Medina Spirit looked like a real winner, but one failed test could change everything.
In many ways, cryptocurrencies are similar. A crypto can be trucking along, picking up big gains. However, there’s always the chance that the crypto fails a key test — a scam, some bad publicity, a lack of utility. There are a number of ways in which a crypto can simply spin out in the middle of nowhere.
Similar to how a drug test can take a champion horse’s momentum and stop it in its tracks, so too can a winning crypto be hindered by a lack of clarity, good faith or vision.
With all this in mind, these five cryptos are each coming up on a key test of their own:
- Bitcoin Gold (CCC:BTG-USD)
- Ethereum Classic (CCC:ETC-USD)
- Ripple (CCC:XRP-USD)
- SafeMoon (CCC:SAFEMOON-USD)
- Dogecoin (CCC:DOGE-USD)
Bitcoin Gold (BTG-USD)
Bitcoin Gold is just one of many forked altcoins enjoying some time in the spotlight recently.
The Bitcoin (CCC:BTC-USD) fork is distinctly different from its parent protocol, but sometimes a name can be enough. Investors have been putting a lot of money into Bitcoin Gold, seemingly in hopes of finding a cheaper BTC. However, this tactic is certain to die out. I don’t think BTG will pass the test.
When new cryptocurrencies were popping up left and right in 2017, there was a fad of naming the fork after the original protocol. Bitcoin Gold, Bitcoin Cash (CCC:BCH-USD) and Bitcoin SV (CCC:BSV-USD) all come to mind. BTG was created as a user-friendly alternative to Bitcoin and saw only brief success before dropping and stagnating near $10.
Bitcoin Gold is picking up a lot of steam recently thanks to this history. Crypto investors are beginning to search for the next booming play, and so putting money on these coins may seem smart. However, a name only gets you so far. Bitcoin Gold’s offering of a more user-friendly Bitcoin just isn’t necessary. People have Bitcoin figured out just fine; if you need evidence, you can turn to its $57,000 price and multi-billion daily trading volume.
Bitcoin Gold and many other hard forks are enjoying their 15 minutes now, but the dust will settle.
Ethereum Classic (ETC-USD)
Ethereum Classic has been flying as of recent. The gains for ETC are steep and swift, and investor interest has been driving a ton of price predictions around the coin. However, I think the end of speculative investing will, much like with Bitcoin Gold, be the coin’s downfall.
Ethereum Classic was born from a security issue that was discovered on the Ethereum (CCC:ETH-USD) blockchain. Wanting to put security at the forefront of its priorities, Ethereum Classic forked from Ethereum’s protocol and sacrificed the efficient performance that Ethereum would undertake in the years following.
However, it appears that users are now more keen on high performance than hyper-security. Ethereum is rocketing upward and the release of Eth2 not only improves on performance, but it ups the security of the blockchain as well, rendering the need for Ethereum Classic moot.
When investors come to realize they didn’t strike oil with the “cheaper Ethereum,” they will be on to the next thing.
Ripple’s XRP coin has drawn a lot of attention, largely thanks to an ongoing lawsuit from the SEC. Ripple allows users to send fiat currency anywhere in the world via smart contracts. The Ripple platform exists to challenge platforms like the Society for Worldwide Interbank Financial Telecommunication (SWIFT), offering faster, cheaper and more scalable transactions. The XRP coin is the native currency of Ripple.
XRP has been up and down since the beginning of the SEC lawsuit in December. While it’s still a far cry from its all-time high of $3.84, the crypto play is still higher than it has been in years. This SEC lawsuit could be a big problem for XRP’s value, though. Regulators have been trying to crack down on cryptos for a while now, and this appears to be their way in.
Recently, Ripple has been pulling ahead in court. Judges denied the SEC access to Ripple’s internal communications, but granted Ripple access to the SEC’s. A judge also directly refuted the SEC’s claim that XRP is a security rather than a currency, a damaging blow to the case.
The problem for XRP lies in whether Ripple can keep this up. The case could be nearing settlement somewhat soon. However, a bombshell from the SEC could be detrimental to the future of XRP. The test here for XRP is more speculative, but failure of this test is just as deadly.
SafeMoon has been one of the fastest-growing cryptocurrencies of 2021. The token, created in March, saw massive gain. However, the crypto seems like a huge candidate to fail as more details come to light.
SafeMoon has a host of issues that could lead it to fail the proverbial drug test. Future plans for the crypto have little to no detail, and there is no current utility for the token. The supply for the token is astronomically high according to its code, which is almost entirely lifted from another protocol. The exit tax for selling burns too few tokens to adhere to the supply and demand plan the developers have for boosting prices. Additionally, it rewards a seemingly arbitrary set of token holders.
The automatic liquidity pool function of SafeMoon calls into question the legitimacy of the operation. The code for SafeMoon shows that the owner of the protocol can redirect tokens from the liquidity pool, lock the pool at will, and include or exclude specific wallets from token rewards.
There is simply too little information about the number of tokens, the allotment of the supply, the liquidity pool, and the future plans for the crypto. SafeMoon has evidently made some earlier buyers a pretty penny, but it’s likely to fall off.
Yes, boo me all you want. I don’t believe Dogecoin is destined to be the next altcoin play that will compete directly with Bitcoin. I’m rooting for it, I really am. But there are some big issues with the meme coin that I see hindering the coin from ultimately living up to its moon-bound dreams.
There is a big problem in DOGE’s volatility. Without a centered utility to incentivize use, the coin relies primarily on investor interest. Sure, it’s inadvertently gotten the greatest marketing team in the world a la Elon Musk, but what happens when Musk finds a new crypto? The coin will not always be bolstered by an eccentric billionaire’s tweets.
I don’t think DOGE will be the next Bitcoin. But, I don’t see it dropping off the face of the planet, either. It has found a novelty use as a payment online. You can buy sports tickets or book a flight with DOGE. I think that’s where it will ultimately stay. Mark Cuban pegged DOGE as a future stablecoin, hovering at $1 and allowing for smooth and easy decentralized payment. That’s not failing like the other coins on this list, but it is a more realistic expectation for DOGE.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article.