For more than 100 years, the stock market has stood on a pedestal above all other investment tools. Although they will not outperform bonds, housing or other commodities every year, none of these other investment channels comes close to matching the stock market’s long-term annual performance.
But that doesn’t stop cryptocurrencies from giving the market a chance to get their money back. for example, Bitcoin And Ethereum (CRYPTO: ETH)The two largest cryptocurrencies by market capitalization saw a rise of 8,640% and 28,970%, respectively, over the subsequent five-year period. Meanwhile, the standard Standard & Poor’s 500 It “rose” 104% more modestly over the same time frame.
Cryptocurrency investors are excited about the potential for blockchain technology to revolutionize payments and possibly even improve other aspects of life, such as supply chains. For example, the Ethereum blockchain is at the core of the success of Decentralized Finance (DeFi) – a financially focused blockchain that uses smart contracts that will bypass traditional financial intermediaries who can slow down or reject transactions. The Ethereum blockchain could also be used to replace the seemingly mile-long paper trails associated with shipping goods around the world.
As another example, I have been monitoring developments with excellent‘s (CRYPTO: XLM) Blockchain in the payments space. Stellar’s blockchain has the ability to convert fiat currencies into Lumens (the currency used in the Stellar blockchain), and return Lumens to fiat currency. It can effectively transfer, verify, and settle cross-border payments in a matter of seconds, rather than the week-long wait that some international payments can take.
But as a crypto skeptic, I am also well aware that most blockchain and cryptocurrency projects fall somewhere between massively overvalued and utterly worthless. Although the following 3 cryptocurrencies are exceptionally popular with investors, I would suggest avoiding them like the plague.
Arguably the first very popular cryptocurrency to avoid are the ones that have the most support from the retail community: Dogecoin (CRYPTO: DOGE).
Dogecoin “Hodlers” firmly believe they are getting closer to the ground floor of widespread adoption. They are also intrigued by the idea of billionaires Elon Musk and Mark Cuban throwing their support behind Dogecoin. But what these people fail to see is that Dogecoin is not bringing any competitive advantages to the table. In other words, it does not add value to the payments space with many other better options available.
As an example, I would like to point out the basic performance and metrics of the Dogecoin blockchain. Dogecoin has an average transaction fee of about $0.55, which is significantly higher than at least a dozen other popular cryptocurrencies. In addition to being more expensive, the Dogecoin blockchain is not particularly fast at validating and settling transactions.
To add to the above, the Dogecoin network is not that popular, nor is it really capable of handling a large influx of transactions. Over the past three months, its blockchain has only been handling about 20,000 transactions per day, its lowest level in three years. relatively, Visa And Master Card Credit Card With 700 million daily transactions, on an aggregated basis, in 2018.
Want another reason to avoid Dogecoin? How about their limited usefulness in the real world. Despite being described as “the people’s currency,” Dogecoin is only accepted by 1,714 companies worldwide, according to Cryptwerk Online Business Directory – and it took eight years to reach that number.
If investors remove Elon Musk’s tweets from the equation, there is nothing in Dogecoin’s sails.
Another cryptocurrency to avoid like the plague is the fourth largest cryptocurrency by market capitalization: Binance coin (CRYPTO: BNB).
At one point, years ago, I was fascinated by Binance Coin. Despite its lack of utility outside of crypto exchange Binance, it was one of a very small number of digital tokens that actually served a purpose. Investors/traders on the Binance platform can pay their fees using Binance Coin, instead of Bitcoin, and save up to 50% on their transaction fees. These cost savings will fade after a few years.
The Binance team also bought back BNB with exchange profits, which is known as a coin burn. It is expected that 100 million Binance coins will be burned over time. Just as share buybacks can make every existing share more valuable to shareholders, the Binance team seems to believe that reducing the total supply of BNB that is available can do the same for stakeholders.
The problem with Binance Coin is that it is facing a mountain of litigation. In May 2021, it was announced that Binance was under investigation by the Commodity Futures Trading Commission (CFTC) over concerns that it had allowed Americans to place trades on its platform. Shortly thereafter, Binance was investigated in the US for alleged money laundering and tax evasion, as well as possible insider trading. To boot, Binance is facing class-action lawsuits in the US and Australia over disruptions to its crypto trading platform during periods of heightened volatility.
Also, to keep up with the theme, Binance Coin has very limited utility outside of its own exchange platform. Cryptwerk notes that only 623 companies worldwide are accepting it as a payment method, as of October 2021. Even with the potential to benefit from DeFi projects, there is no reason why this token should have a market capitalization close to $70 billion.
The third and final cryptocurrency to avoid is like the plague, Shiba Inu (CRYPTO: gray hair)It just might be the most dangerous one on this list, and I don’t mean that in a positive way.
The Shiba Inu was launched last summer as a meme coin inspired by the Japanese Shiba Inu dog breed. Make no mistake about it, this coin is meant to benefit from the same community influence that drove Dogecoin to the upside earlier this year, and it is relying on the Shiba Inu theme to help in this endeavor.
Additionally, since the supply of Shiba Inu was 1 quadrillion token at launch, its price per coin is $0.00002614 microscopic, at the time of writing. Just as some investors mistakenly believe that owning more shares in a penny stock will give them a greater chance of getting rich, Shiba Inu appears to be capitalizing on the misconception that owning more nominally cheap cryptocurrency tokens will give investors a chance to get rich quick.
The truth for Shiba Inu is that it is most likely a coin. According to data from cryptocurrency trading platform and ecosystem Queen PieceThe average investor holding time is only six days. Given the potential for selling and washing rules to come into effect, as well as higher tax rates associated with short-term capital gains, Shiba Inu traded hoping that Elon Musk tweeting a picture of his dog didn’t seem worth the risk.
To boot, the real-life Shiba Inu use case is more laughable than Dogecoin and Binance Coin. Considering that it has only been around for a little over a year, only 43 companies worldwide accept Shiba Inu as a form of payment, per Cryptwerk. Outside of the cryptocurrency exchange, Shiba Inu is virtually worthless.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.