crypto market volatility

In this opinion piece, Woo takes readers on a deep dive into the historical performance of bitcoin and other cryptocurrencies that he believes already compete against it as general purpose consumer "payment coins".

Just as an example, last year we saw the rapid appreciation of monero, the mega-hyped launch of zcash (which peaked at an astounding $5,300 per coin) and subsequent pumps in other similar offerings including shadowcash and navcoin.

But, while it may seem like these crypotcurrencies are something new or novel, I would argue that all of these are "payment coins" competing in the battle to win the war to be general money.

While most altcoins tend to be forging into market specific "appcoin" territory, what makes payment coins unique is the sheer size of the potential win. While appcoins can only capture a market segment that effectively puts a cap on their valuation, payment coins being a kind of generalized money can capture "M2 money supply".

When I look at payment coins, I see that very strong economic network effects are in play.

As I covered earlier with my Commerce Index, liquidity and low volatility are very important for a coin to be useful for general trade as both of these qualities are crucial to make it compelling for end consumers to charge their wallet with a payment token for spending. With high volatility, there’s too much risk holding funds, and with insufficient liquidity, wallet recharge and merchant fees will be high.

When looking at the combined qualities of liquidity and price stability together as a Commerce Index, we could see other coins catching up with Bitcoin. In this study I will be doing a deeper dive into these two qualities individually.