In the previous post I explained how to use the ROI as a tracking tool (signal) for an investment. The reliability of the signal depends upon a sufficient number of transactions over a sufficient length of time. There are over 1200 “altcoins” in the coin market. For most of these the sufficiency requirements are not met. A mathematician would say that “the signal is lost in the noise”. Only time will tell which coins will be winners.
Meanwhile we can see the front-runners by observing the marketcap reports. The marketcap is the trading price of a coin muliplied by the number of transactions. The list is in descending order with the highest at the top. Divide the marketcap by the transactions and see the price alone. If the popularity of a coin goes down it will slip in the list and vice-versa.
By watching the marketcaps we can compute real or hypothetical ROI’S. Thus we have a tool to determine the better investments. Experienced investors have a portfolio. That is a group of coins all of which they have judged to be good opportunities. On days of investment, it is the one or few with the higher ROI’s that are chosen.
It is easy to demonstrate that the underlying blockchain technology of Ethereum has significant advantages over that of Bitcoin. But will people rush to sell their Bitcoins to buy Ethereum? No. The coin is not the technology that controls it. The value of the coin is determined by the market.
We are playing a game of popularity. Fortunately it is a game in which the runner-ups pay off too.