Altcoins: Why I Added LTC, ETC and Ripple

I'm long on bitcoin. If you read this blog, then you know that.

Until early June I'd never bought any other cryptocurrencies other than BTC.

And now that's changed. I've added 3 new cryptos to my portfolio: Litecoin, Ethereum Classic, and Ripple.

Are you curious about other cryptocurrencies? I have fundamental reasons for each purchase (as in I like the business fundamentals other than the technicals on the price chart). Let's check them out.....

Litecoin

Litecoin symbol LTC was started as a hard fork off of bitcoin by founder Charlie Lee to make it easier to use to process payments. A fork is where the software/code starts in one direction and splits off into two directions. In this case, it split off into Bitcoin and Litecoin.

Charlie Lee, until last week, was the Director of Engineering at Coinbase (this is an affiliate link where we both earn BTC if you use it to buy or sell), one of the sites I use to buy my coin.

Litecoin looks to process a block 4x faster, every 2.5 minutes instead of Bitcoin’s every 10 minutes and they have already started using SegWit, which is part of the Bitcoin scaling debate to move transactions through the BTC network faster and they are using it successfully.

Why I Like It: The fundamental reason why I like LTC is as a payment network. While Bitcoin is/was supposed to compete with Visa/MC as a payment network, that is proving to not be the case. Instead, Bitcoin as a store of value and ability to transfer large-scale value fast and cheap is making it more of a competitor to the SWIFT network for international wire transfers than for VISA to pay for your coffee at Starbucks. On the other hand, LTC is a great payment network for fast, easy, secure payments. For micropayments, it works even better due to its very low fees.

If you want to follow and learn about Litecoin, Litecoin is on Twitter at @litecoin and Charlie is on there as well at @SatoshiLite. They are great resources to see what’s going on before you buy or as part of your due diligence. My 2 favorite places to buy are Coinbase (link above) or Bitfinex.

Ethereum Classic

The crypto making the most noise at the moment is Ethereum, symbol ETH. This is the platform where all the initial coin offerings (ICOs) are coming from that's gained a zillion percent in the last year.

As that's not what I bought.  I bought Ethereum Classic, symbol, ETC.

Again, this coin started with a hard fork. Ethereum (ETH) split from what is now called Ethereum Classic, or ETC. ETC is what I purchased. An experiment on Ethereum called the DAO (Decentralized Autonomous Organization) and the resulting hack and theft of ETH is the cause of the fork that split one network and coin into two.

Both networks allow for the creation of smart contracts, which are self-fulfilling contracts seen as a big advance forward in the cryptocurrency world. Middlemen like escrow agents can be eliminated if the contract states that If A does x, then B releases the money to A. This is what a smart contract does.

ETC has FAR less developer support than ETH and this is why many of the ICOs so far are on ETH. However, ETC just had its first one this week.

Why I Like It: An important premise of the decentralized nature of these networks is that no one person is in charge. ETH has a benevolent dictator, the very nice and very smart Vitalik Buterin but ETC is more decentralized. I like that. ETC developers also believe that the software code should be the rule of law and that if you don’t like the code and what it does then just don’t use it. ETH created their fork for the DAO to basically bail them out of a theft and hack that was a bug in their own code. Many people see this as wrong as one specific group got an extraordinary benefit that others did not get. ETC is very egalitarian and the code is the law. I like that. It’s also an underdog and I like that too.

China’s 2nd largest exchange BTCC just started listing ETC and Bloomberg just added ETC to their flagship terminal service. Crypto investor Barry Silbert is investing in ETC, setting up a fund for it and there is additional institutional support for it as well.

Ethereum Classic is on Twitter at @eth_classic to learn more about them.

Ripple

Ripple uses cryptography but is not truly decentralized like the other coins here. This is more like a software application, and in this case, that’s a good thing. This application has a token, which is the coin I purchased. Ripple, symbol, XRP,  is also (like Bitcoin now) looking to enable cross-border payments and money transfer that would compete with the existing SWIFT network.

The distributed technology (another word for block chain) allows banks to work with each other directly enabling global settlement without SWIFT or any other third party involvement. Without this technology, if a bank in Chile and a bank in Uruguay wanted to do business together or settle a transaction for a client, they would BOTH have to go through the SWIFT network, pay to convert their currencies to USD and pay the SWIFT network and then pass those costs onto the client. With Ripple, the banks settle directly with each other. The importance of this for global trade and foreign exchange cannot be overstated.  

Why I Like It: This is exactly the kind of application banks need. 15% of the world’s top 50 banks use Ripple including Standard Chartered, BBVA, UBS,  and the world’s largest Islamic Bank. Reports vary as to whether 60 banks or around 75 banks around the world are using it but XRP is growing in influence and number of bank members each month.

Just to show that it’s not all hype and puppies and rainbows, here is a good quality critique of XRP, stating that while useful it may be overvalued.

Ripple is on Twitter at @ripple.

The Elephant in the Room: FOMO

FOMO or fear of missing out is an important piece of this conversation since most cryptos are looking at more than 100% gains and some in the thousands of percent for 2017. It’s easy to think ‘hey, I need to jump on this train’ or ‘Prices are never going to be this low again’.

I feel you cause I’m thinking about these things myself. As one of my Registered Investment Adviser clients likes to say, you are never going to time it right so if you have reasons to buy you should just buy. And he’s right.

In fact, I’ll take it a step further. If you aren’t going to just trade in and out of these cryptos, then you want to be sure you have a reason for buying that is based on the coin’s fundamental analysis or technical analysis just like you are supposed to do with stocks. Fundamentals are business useful aspects like LTC’s faster processing of small payments or Ripple’s increased bank participation. Technical Analysis is looking at the price charts for patterns to spot buying and selling opportunities.

For me, a combination of fundamental analysis and some research to enhance my understanding is why I have chosen to buy these 3 additional cryptocurrencies. Do you hold or do you trade? This is another question you have to ask yourself.

With all these coins you have to do your own due diligence and only use risk capital, meaning money you can afford to lose. You need to understand your own appetite for risk and which ones, if any, fit that appetite.

Lastly, did you notice that all these coins are active on Twitter? Are you on Twitter? If you invest in p2p lending or in crypto then you need to be on Twitter. Both industries are VERY active there. I’m @StuFinancesTech if you want to follow me.

If you are new to cryptocurrencies then you can buy Bitcoin, Ethereum (ETH) or Litecoin on Coinbase like I use for my Bitcoin. These and many other altcoins are available on Bitfinex as well.

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

4 thoughts on “Altcoins: Why I Added LTC, ETC and Ripple

  1. ETC is an odd one. It has an issuance cap like Bitcoin so it’s not actually useful for ICO’s which have eaten up all the ETH of late which is smartly uncapped. But I believe before the hard fork ETH was originally capped.

    Another funny one like ETC is Zcash Classic (ZCL) which has now soft forked into ZEN. In this case ZEN reverted back to being almost like its original namesake, Zcash (ZEC), that inspired the split. Irony.

    The major players are Bitcoin, Litecoin, Ethereum, Dash, Monero, Zcash and Ripple. They each have their own unique uses cases and Dash is the most advanced with blockchain features at this point, with Monero a close second. Yet we’ve probably entered the twilight of crypto being novel value transfer mechanisms so apps based on smart contracts/token issuance is the next evolution.

    Do note that ETH is going to Proof of Stake at the end of the year. I’m not sure how that is supposed to work with unlimited issuance, but mining will no longer exist.

      • I haven’t really looked at it yet, but I suspect it could mean like a masternode setup where “he who stakes the most gold” has the power to earn income from verifying blockchain transactions that the miners formerly did. It’s not a very democratic approach and the stakes requirement can be very high in USD terms. DASH requires a $40K stake to run a masternode last I recall. There’s about two handfuls of staking blockchains and they all require substantial staking commitments with pretty unimpressive single digit yearly ROI.

        Between mining and staking, just dollar cost averaging into a cryptocurrency every month would have been far superior. I’m no longer mining because the constant “arms race” makes it pointless and risky. Mining is too much like dividends and the continually dropping “yield” reflects it.

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