This is an article taken from 21CRYPTOS magazine, to read the industry’s leading monthly digital cryptocurrency magazine head click the button below.
As the number of cryptocurrencies said to have met with an untimely demise creeps closer to the 1,000 mark, 21CRYPTOS explores tell-tale signs that you’re ‘hodling’ a dead altcoin.
The list of cryptocurrencies reported to www.deadcoins.com as being either ‘deceased’, ‘hacked’, a ‘scam’ or a ‘parody’ is currently just shy of 1,000 strong. Some industry observers believe the worst is yet to come.
Although reasons for making the list can sometimes appear rather spurious, like HyperPay’s entry; “no connection with its product (an ugly as f*** wallet)”, most explanations are fairly emphatic. “This coin has only one developer and he is gone” is the pretty damning verdict accompanying Desire’s (DSR) presence in the ‘deceased’ category.
If you own one of the near 1,000 coins on the list, regardless of the category or legitimacy of the evidence pointing at its demise, you would be right to feel pessimistic about its survival chances.
But if you’re still ‘hodling’ on to a coin that’s bleeding profusely, and hasn’t yet made the list, how can you tell if it’s actually ‘dead’?
How ‘dead’ can an altcoin actually be?
Identifying a ‘dead’ altcoin is actually trickier than you might think. Generally speaking, while altcoins can ‘die’ they don’t usually disappear.
A coin may lose 95% – 99% of its value, have next to no usage or purpose, non-existent trading volume and still actually exist – a cryptographic zombie.
Like the flesh-eating kind, altcoin zombies also tend to stir into action after almost all signs of life have disappeared. Take Paragon (PRG) for example. The company behind the cannabis-related coin was seemingly dealt a death blow back in November 2018 when it was ordered by the SEC to refund ICO investors and pay a hefty penalty.
This came after several months of inactivity, thin trading volume and an almost dormant price of around $0.04. For many, this would have been enough to consign Paragon to the altcoin graveyard.
However on January 1st, 2019, the low liquidity and thin volume of PRG trades on the YoBit exchange provided optimal conditions for an orchestrated ‘pump and dump’. PRG’s price leapt nearly 7,000% to $10, and most of the way back down in a mere 24 hours. A new community of ‘bag-holders’ was created while scammers walked away with a hefty profit.
So how can you tell if your coin is actually ‘dead’?
If the Paragon debacle has taught us anything, it’s that we need to accept that even if a coin is, to all intents and purposes, ‘dead’ – it can still pump, hard. As long as a coin is available on an exchange, people will be willing to buy it and its value can grow.
But, if you can accept that you may still miss out on a rare 7000% price-pump from beyond the grave, there are plenty of signs that an altcoin may be best left to rest in peace.
Whilst a 90% to 95% collapse will be enough to permanently see off many altcoins, price alone is not enough to determine the future prospects of a project. Back in 2011 Bitcoin itself fell a staggering 94% from $32 down to $2. Many obituaries were written and estimates of $20,000 valuations seemed like pie in the sky, and yet six years later…
The key lesson here is, no matter how large the draw-down in price, a project is still potentially viable if enough people are willing to use it. If your altcoin is tied to a product, like a wallet or a game, check whether people are still using it. If so, and the use-case is still valid, then there may be life in the coin yet.
Of course, having willing users is irrelevant if the project is no longer running behind the scenes. Projects with centralised teams are more vulnerable to price drops- it can be hugely tempting for teams to cut and run as they see their own funds disappearing before their very eyes.
Decentralised currencies like Bitcoin are somewhat insulated from this risk as no one entity can decide to close shop.
Bitcoin developer Jimmy Song also made the point in a recent blog (link: https://medium.com/@jimmysong/2018-the-year-bitcoin-separated-from-the-pack-f17ddb05df8d) that centralised teams who have perhaps found it ‘too easy’ to raise money during the bull market are now struggling to find a use-case, whereas decentralised entities rely on entrepreneurs building products and services that people actually use, first and foremost.
So if you’re holding an altcoin that has shed significant value during bear season, take a look under the hood at who’s running the show. Is there a centralised team who could deal a hammer blow to the project by departing or exit-scamming? Or is the project fully decentralised with plenty of advocates working to steady the ship?
If a coin has experienced a huge price drawdown, and development has ceased – or even worse – there are no developers working on the project, it’s most likely dead.
There are however plenty of altcoins that have lost over 90% of their value during the 2018 bear market that are still delivering on their roadmap, with plenty of funds left in reserve.
Lux Coin, for example, has lost almost 98% of its value since reaching January 2018 highs of around $44. However, development on the LuxCore project has been unrelenting with several key releases including a POS wallet as a service, smart contract capabilities and parallel masternodes that are more resistant to the ‘grim-reaper’ of cryptocurrency death signals – the 51% attack.
If you suspect your coin may be ‘dead’, take a look at the project GitHub and check for recent commits. Snoop around the project Discord or Telegram groups, or even contact one of the project developers and ask for their take on how things are progressing – there may be enough going on behind the scenes to warrant a stay of execution.
The 51% attack
Regardless of market sentiment, if a cryptocurrency is to survive and thrive, trust in the security of the coin is an absolute must.
If your coin’s network has fallen victim to a 51% attack, that may be a sign that you need to read it the last rites.
In recent times big name cryptocurrencies such as Verge, Bitcoin Gold and even Ethereum Classic have fallen victim to such attacks and are still around to tell the tale.
However, the loss of trust brought about by the attacks could be a hammer blow to their chances recovery during the next market upturn.
Bitcoin Gold was delisted by a number of exchanges after a series of attacks, whilst the price of Verge has yet to recover from its recent spate of network breaches. It remains to be seen how Ethereum Classic fares after January’s attack.
Ultimately, a holder’s decision on whether to consign their coins to the altcoin graveyard is always going to be a tough one, as the possibility for gains still exists while the currency is exchangeable. But clues to a project’s chances of recovery are there, as long as you know where to look.