Altcoins sometimes fall into a slump. This can happen for a multitude of reasons, but as a prudent investor, it is important to understand the nature of the downturn and how likely the coin is to quickly rebound.
This article examines two coins that are currently suffering through a bear market: NEM and Steem.
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NEM (XEM) | Steemit (STEEM) |
| Utility | Community-based digital currency and decentralized software platform based on Proof-of-Importance, which replaces proof-of-stake standard by measuring a supernode's number of wallet transactions to determine share of transaction fees. | Steemit network store of value, social network reward token. |
| Number of Holders | ~250,000 | 500,000+ |
| Community | Large (approximately 193,000 Twitter followers and 22,000 Facebook followers) | Large |
| Market Capitalization (2017) | $9,297,269,998 | $940,021,504 |
| Daily Trading Volume (High, 2017) | $361,492,000 | $3,987,600 |
| One-Year Performance (2017) | 8,084% | 4,835% |
| Public Awareness | Low | Low |
NEM has been hit with a more than 84 percent drop in its market capitalization from its record high of $2.09, set on Jan. 4, 2018. The stalled recovery from the bitcoin price correction and the January hack of Japanese exchange CoinCheck has left NEM struggling. Fears that the stolen XEM would be sold, which have proven to be true, kept investors away. News that CoinCheck will compensate customers for the lost money, however, has started a slow restoration of XEM's position.
Similarly, Steemit has lost almost 75 percent of its USD record price of $7.31, set on Jan. 3, 2018. The inevitable collapse from speculation from the South Korean Upbit exchange, which was responsible for almost 88 percent of all Steem trades during the record spike, saw Steem relinquish its short-held trade volume crown taken from bitcoin during the surge. The unbalanced transition volume - (Bittrex, in contrast, only generated $33 million in trade volume) - demonstrated the apathy about the coin, despite the price spike.
With a higher one-year performance, daily trading volume, and market capitalization, you could expect XEM to recover faster than Steem. This is dependent on how fast the altcoin community can embrace what NEM has to offer.
NEM, formerly the New Economy Movement, was built on a different code-set than other digital currencies. Differing from proof-of-work or proof-of-stake coins, NEM uses "proof-of-importance" for consensus building. This "proof-of-importance" assigns an importance score to nodes based on the node's transaction activity.
The idea is that the best and most powerful nodes will have the highest importance and therefore be trusted to process more transactions. As these nodes tend to be harvesters (nodes that runs 24 hours a day with at least 10,000 XEM vested, which constitutes ten percent of your XEM wallet) or supernodes (nodes that runs 24 hours a day with 3,000,000 XEM vested), transactions can occur with less electricity used and in a fraction of the time of other altcoins.
With NEM's use of namespaces and mosaics for decentralized applications/assets management and storage, NEM constitutes a new type of "smart assets" system. This is not so different from Steemit, where users can store and link to decentralized assets and "upvote" them to gain a share of Steem Power.
As with both coins, the speed at which these coins will recover and grow depends on how fast the features of these platforms can be deployed and how quickly the altcoin community can embrace it. With over 300 businesses already embracing NEM's private blockchain "Mijin," these coins will remain potential investment targets for the foreseeable future.
It is important that you realize the risks involved in engaging in any altcoin activity before investing. As always, due diligence is key.
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