Decred: A Top Tier Cryptocurrency
Andy Hecht | Nov 25, 2021 07:14AM ET
This article was written exclusively for Investing.com.
- Looking for the next big gainer in cryptocurrencies
- Decred has been around since 2016
- A respectable market cap creates a critical mass
- A huge rally peaked in April 2021
- Only invest what you are willing to lose
The latest high in the cryptocurrency asset class came on Nov. 10 when Bitcoin and Ethereum rose to new record highs, turned lower, and put in bearish key reversal patterns on the daily charts. Volatility in the crypto arena is the norm, not the exception.
The bull market in the burgeoning asset class has been nothing short of incredible. However, the bearish reversals led to a correction, which has been the pattern over the past years.
Everyone continues to talk about cryptos; some love them and believe they are the future means of exchange that will “unite the world.” Others stand against the asset class for various reasons. However, the challenge to controlling the money supply and traditional banking is likely the primary reason for opposition.
Each day new cryptos come to market. Many, if not most, will fail. The leading cryptos have critical mass, with market caps above the $1 billion level. Decred (DCR) is a cryptocurrency that stands with the leaders. With over 14,700 cryptocurrencies circulating in the asset class, it is overpopulated.
h2 Looking for the next big gainer in cryptocurrencies/h2The cryptocurrency diehards view the asset class as supporting a libertarian ideology that removes power from governments and returns it to people. Crypto values come from bids and offers in the marketplace. Central banks, monetary authorities, treasurers, and government leaders cannot expand or contract the money supply in the crypto arena as they can in fiat currencies.
Many proponents claim cryptos have no intrinsic value; the prices come only from buying and selling in the market. Individuals establish the values as a crowd of market participants buy and sell the assets in a transparent environment. The bottom line is crypto values embrace the crowd’s wisdom which establishes prices.
The other driving element is the speculative frenzy created by returns in the leading cryptocurrencies. Fear and greed drive human emotions. Bitcoin’s rise from five cents in 2010 to a high of nearly $70,000 per token in November 2021 has been a powerful force, causing a flood of speculative buying in many emerging cryptocurrencies as buyers search for the next golden opportunity.
At the end of 2020, the number of cryptos floating around in cyberspace reached 8,153 different tokens. As of Nov. 23, there were over 14,700, an increase of over 80%.
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Speculative demand is driving supplies. The number of tokens continues to rise daily, even during corrections, proving the growing appetite for these assets.
h2 Decred has been around since 2016/h2Decred is a cryptocurrency that combines two consensus models—proof of stake and proof of work. When new DCR blocks are mined, 60% of the block reward goes to proof of work miners, 30% to proof of stake voters, and 10% to fund the development of the protocol. Stakeholders may also vote on changes to the protocol.
Proof of stake protocols is a class of consensus mechanisms for blockchains that work by selecting validators in a proportion of their quantity of holdings in a cryptocurrency. Proof of work protocols incentivizes a miner’s computational effort. Proof of stake systems do not incentivize extreme energy consumption, making them greener or more environmentally friendly.
Decred’s website states it
“employs an innovative hybrid Proof of Work/Proof of Stake system that layers security and carefully aligns incentives. This system yields the best of both worlds, making it an order of magnitude more expensive to attack than pure proof of work for pure proof of stake.”
The site also highlights Decred’s adaptability and sustainability.
h2 A respectable market cap creates a critical mass/h2At the $108.30 level on Nov. 23, DCR tokens had an over $1.466 billion market cap. DCR is the 86th leading token out of 14,708, making it more valuable than 99.4% of all cryptocurrencies.
The higher a crypto’s market cap, the more liquid the token, leading to investing and trading opportunities. Cryptocurrencies with market caps above the $1 billion level tend to offer market participants far more liquidity to buy and sell tokens on tight bid-offer spreads. However, the volatile nature of the asset class means that price vacuums occur in even the most liquid tokens.
Source: CQG
The daily chart highlights Bitcoin’s decline from $69,355 on Nov. 10 to a low of $55,375 on Nov. 23, an over 20% drop in under two weeks. While Bitcoin is the world’s most liquid cryptocurrency with an over $1 trillion market cap, the price variance often leads to price vacuums when tokens rise or fall.
h2 A huge rally peaked in April 2021/h2Decred tokens began trading in February 2016 at around $1.20 per token.
Source:
The chart shows that DCR tokens have made higher highs over the past years. After reaching a low of just below $10 in March 2020, the price rose to a high of nearly $250 in April 2021. At the $108.30 level on Nov. 23, DCR has provided early investors with substantial returns of around one-hundred times their original investment in early 2016.
h2 Only invest what you are willing to lose/h2Market participants must consider the risks when investing in DCR, Bitcoin, or any other token. Incredible rewards come with a price; extraordinary risks. Events can cause any token, including the top-tier cryptos, to become worthless. Therefore, only invest capital you are willing to lose in the asset class.
Cryptocurrencies have offered fantastic rewards, but the risks remain a function of those profits. Any investor needs to understand that the price rises are unprecedented. While they may continue, there is also the potential for carnage. Approach cryptocurrencies with your eyes wide open regarding the potential for total losses.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
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