At the time of this writing, BitTorrent (CCC:BTT-USD) is up roughly 1600% year-to-date (YTD). That makes it popular among the altcoins. It also leaves everyone scrambling to understand what it is.
If you can understand what it is, though — and that’s not an easy task — then you can ostensibly figure out whether it makes sense to buy into BTT-USD. The answer? To me, it doesn’t make much sense at all.
Here’s what you should know about BitTorrent as it rides the crypto wave.
What is BitTorrent?
BitTorrent is a P2P (peer-to-peer) protocol. A peer-to-peer protocol is a group of computers — called a swarm — that work together to share information without the need for a centralized server.
This requires a tracker. A tracker is a kind of server that connects the computers in a torrent and shares their respective IP addresses with one another. Each computer downloads small pieces of a file or data and shares them with other computers in the swarm. That collective download power lessens the burden and means that upload speeds can theoretically exceed the speed if a central server were used.
At least, that’s what BitTorrent was known for a few years ago. Its primary application was piracy. Because of that, the company has not been without its own share of legal woes. In fact, there have been a plethora of lawsuits filed against BitTorrent in the United States.
These days, however, we’re talking about this name because of the BTT-USD crypto and its meteoric rise — not because of its controversial past.
A Bit of Math
To say that the world of cryptos is imperfect would be a great understatement. For one, we are currently in the Stone Age of crypto valuation. If you want to know what the value of BTT-USD is, you’ll have to look at it vis-à-vis the stock market.
A good old market capitalization is the best tool I’ve found to help me make some sort of comparative judgment. Currently, BTT-USD has a market cap of $3.6 billion. Roughly speaking, it’s worth a little less than a third of what GameStop (NYSE:GME) is valued at.
I’m not make this comparison by accident. Rather, I think both names are simply a sign of the tough times we are facing. A lot of things are upside down right now. These days, people are much more willing to make “YOLO” bets today because they worry about how bad tomorrow might be.
On the other hand, investors who care to look could certainly find plenty of logical investments with a similar market cap to BitTorrent. What’s more, those investors who take the time to judge BTT against a traditional stock with the same valuation should, by and large, come to the same conclusion: the stock makes a lot more sense as an investment.
It really boils down to a question of utility.
The Use Case for BitTorrent
In researching for this piece, I had a tough time trying to understand what exactly BTT will be used for. That brings to mind a cardinal rule of investing: you shouldn’t invest in what you don’t understand.
This is my biggest pet peeve with many cryptocurrencies. It’s also the reason why I tend to like much more transparent crypto projects like Cardano (CCC:ADA-USD). Or, a project like Ripple (CCC:XRP-USD), which facilitates cross-border currency transactions.
BitTorrent, on the other hand, is opaque from where I’m sitting.
The argument here simply seems to come back to the idea that BTT has risen so spectacularly that individuals would be foolish not to jump on board. I’m sure I’m not the only person who thinks that fear of missing out (FOMO) is the primary catalyst for BTT.
So, until this crypto can show how it has truly valuable utility in the real world, I’d stay away. Sooner or later, the bubble will burst for altcoins like BTT-USD. Don’t be caught holding the bag.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.