They are nuanced. We have:
-Protocol coins
-Utility tokens
-Security tokens
-Non-fungible tokens
But to an investor, there's only 2 types of altcoins. Oscillators and Degenerators. You can spot them on this chart of the entire market.
/1
The vast majority of alt-coins are Degens. Their price chart has a measurable half-life, like radioactive decay. Plotted on a log chart, it's a straight line down. (This one is Namecoin, a promising coin of its era, there's over 2000 examples like this).
/2
A handful are oscillators. Oscillators are proving SoV properties.
To qualify they need to keep up with BTCUSD gains. To find them, plot their BTC value. It must oscillate around a horizontal line, for at least one full bull-bear cycle (around 4yrs). More cycles are better.
/3
Let me bring up this Oscillator. It's DOGE, a coin that was created as a joke, it has had no active development for years. It's a humour fork of Bitcoin offering no technical innovation.
And it's a freaking oscillator.
/4
DOGE achieved SoV because of Lindy Effect. It's listed on nearly all exchanges, it's supported by most wallets, it has a liquid market.
Note I didn't say it has cutting edge technology, scaleability, fancy smart contracts, governance, or has solved sharding.
/5
I point this out to mock the common thought train that you need innovation and cutting edge tech to build value in your coin.
These are monetary instruments, they build value with economic network effects.
/6
Here's an interesting one. It's DCRBTC. It's at a critical stage coming onto completing it's very first full bull-bear cycle, it needs to emerge cleanly holding it's horizontal oscillation against BTC. Only then can we say it's achieving SoV properties.
/7
If you plan on being in altcoins here's my rules of engagement:
1) It's critical to determine a Oscillator from a Degen. 2) Oscillators are good to enter and exit to stack more BTC 3) Never HODL a Degen, period. GTFO 4) Be careful on the coins younger than one full cycle.
/8
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The parent entity, iFinex, is making huge profits with its Tether capital sitting in US treasuries. Tether earns $3b per year right now. iFinex also has 94,000 BTC returning from the Bitfinex hack funds seizure ($1.5b).
Capital moving to OKX may explain its exchange token performance in this bear market.
Anything that works will need trusted centralised parties.
If true, dapps and L1s are just a wild goose chase over an intractable problem.
Please prove me wrong.
Best way to prove me wrong is to name a dapp that provides a benefit that people want that cannot be done by better by existing Web2 and Bitcoin technology.
Example arguments:
- why a DEX will be better than a CEX
- seamless fintech inter-op across the web using MetaMask
I suspect the 2 key issues needed to be solved in order to have true decentralised apps that can fulfill the dream of "Web3" are:
- prevention of sybil attacks
- ability to peer into the global state across all L1s by any dapp. (I think this problem is provably intractable)