Cryptocurrencies Poised for yet Another Disruption
Cryptocurrencies are slowly but surely transforming the way in which we transact. In many cases, digital currencies are also disrupting the way in which we store and / or share monetary value. Now, they are also disrupting the long-established risk-return relationship. Most of us are aware of the financial relationship of return being a direct function of the risk taken. This is to say that the higher the risk, the higher the return. This is the very reason why we often find certain (riskier) penny stocks delivering much higher relative returns than the (less-risky) large-cap stocks in the stock market. The bond market also confirms this relationship when we see high-yield or junk bonds delivering a higher interest rate than the investment grade bonds; high risk equals high return again. However, the cryptocurrency market seems to be in the mood to disrupt this too. Certain lower risk privacy coins are now delivering higher returns than the relatively higher risk-bearing Bitcoin (BTC); so low risk, high return.
Altcoins That Offer Better Privacy
Privacy coins are altcoins that offer higher privacy using technology and processes such as stealth addresses, mixing process, obfuscation, and dummy transactions, to better obscure transaction particulars. Simply put, these digital currencies are better at preserving the anonymity of the transaction and the transacting parties. In comparison, it is easier to track the source of a transaction in public blockchains like Bitcoin, so lesser privacy in that sense. Monero (XMR), Dash (DASH), Zcash (ZEC), and PIVX (PIVX) are popular examples of privacy coins.
Price Analysis- Privacy Altcoins vs Bitcoin
We did a little price analysis of certain privacy coins and Bitcoin, to figure whether the risk-return relationship holds true in the cryptocurrency market as well. What we concluded is that the privacy coins; which offer more privacy and security to the transaction party, hence, the less-riskier alternative to other established public blockchains; are now offering better price returns than Bitcoin (BTC).
Over a one-year period, that is, since April 30th 2017, Monero (XMR) has delivered 983% in price return versus Bitcoin (BTC) whose price is up by 599%. Since the beginning of this year, Bitcoin’s price is down 31% versus Monero’s -28.5% price yield YTD. In the past month alone, 4 privacy coins have outperformed Bitcoin (BTC) in price returns (see charts above). Monero (XMR), Dash (DASH), Zcash (ZEC), and PIVX (PIVX) have returned 46%, 71%, 61% and 57% versus Bitcoin (BTC), which has delivered 38% in price return. So, better privacy here comes with better returns.
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