Best Altcoins of 2021 | Altcoin Quarterly Report | Q3 2021
THERE’S NO TIME LIKE THE PRESENT TO BUY ALTCOINS.
It’s just a matter of buying the right altcoins.
Hi, Ian Balina here — I’m thrilled to welcome you to the second edition of Token Metrics’ Altcoin Quarterly Review!
As founder and CEO of Token Metrics, I lead a team of experts who are well in the habit of going hands-on with emergent cryptocurrency projects, peering under the hood to evaluate them on their investment merits. From the fundamental to the technical to the quantitative, we put hundreds of upstart crypto companies under a multifaceted microscope every quarter to answer the perennial question: where should you put your money after BTC?
The Altcoin Quarterly is our effort to sort signal from noise in the (rather noisy) world of crypto, and the document in your hands represents our team’s distilled efforts for the third quarter of 2021: just the best of the best of what we’ve looked at over the past three months. We hope you use this information to make tidy profits in the crypto market in the quest to achieve economic empowerment for you and your family.
All told, we’re singling out seven projects here as having outsized opportunities for return on investment. So what are you waiting for? Read on!
Happy trading,
Ian Balina
FORMATION FINANCE ($FORM)
78% code review // 82% fundamental
Formation Finance is a DeFi yield aggregator that uses a risk-parity approach to provide access to four different DeFi yield products. Each of these products uses a dif- ferent strategy that comes with their own levels of risk, letting users pick the one that best suits their personal risk tolerance.
Formation Finance is simplifying the process of earning yield for users who don’t want to manage money and risk across multiple DeFi protocols. Its strategies encom- pass multiple blockchains, allowing for more oppor- tunities to earn higher yields at lower risks. Formation Finance also has an impressive lineup of solid investors backing it, including the founders of Bancor, Synthetic, and Polygon.
Valuation and tokenomics
FORM has a fully diluted market cap of $160 million. Its valuation is slightly cheaper by comparison to the rest of the asset management sector within crypto. It’s also cheaper than peers like Enzyme (MLN), which has a valu- ation of $260 million. Formation Finance wants to bring risk-parity strategies to crypto. These strategies were in- troduced by Bridgewater, which has $230 billion in as- sets under management. If the FORM token captures 1% of this figure and trades at a total value locked (TVL) ratio of one, then ROI potential comes in at around 14x.
The FORM token has multiple use cases. FORM token holders will have voting rights in its DAO governance. They will receive rewards in $FORM (50% of the reve- nue collected through the protocol) when they provide liquidity to the ALPHA, BETA, GAMMA, and PARITY in- dices. FORM token holders will have access to mem- bers-only price discovery liquidity pools. In other words, they will have the ability to gain early funding access to the most promising new DeFi projects. One strong aspect of the tokenomics here is that a ma- jority of the proceeds from their token sales will go into developing the technology and ecosystem.
That said, the supply allocation is still tilted very heavily in favor of the team and its investors. $FORM is available on Uniswap, Gate, and Kucoin.
IMMUTABLE X ($IMX)
It seems like we just had a summer of NFTs. Immutable X is an Ethereum-based layer 2 solution that facilitates high-speed, low-fee transaction processing for NFTs. It uses Starkware’s ZK roll-up solution to cre- ate its own NFT marketplace, where NFTs can be traded without the high fees and slow transactions usually as- sociated with Ethereum’s native layer 1.
Immutable X has impressive backers with solid track records in the crypto space, like Coinbase and Galaxy Digital. Immutable X has furthermore partnered with key NFT-based games and platforms in order to at- tract users to their marketplace. The biggest of these is Gods Unchained, the popular NFT-based card game developed by the founder of Magic: The Gathering, the most popular trading card game in the world. With the Ethereum blockchain being home to most NFTs in ex- istence, Immutable X has positioned itself as a project to provide a lot of value to the NFT space.
Valuation and tokenomics
IMX’s public sale on Coinlist was held at a fully diluted valuation of $250 million. We think investors who could get these tokens during the public sale got a deep val- ue discount. The layer 2 sector average of the tokens in our universe is $1 billion, and the (publicly listed) sector leader Polygon (MATIC) has a valuation of $13 billion. If IMX catches up to the sector valuation, the potential for return on investment is 4x. If it catches up to MATIC’s valuation, ROI potential is 52x.
The IMX token has multiple use cases including govern- ance, transaction fees (20% of the protocol fee on every Immutable X transaction must be paid in IMX), and staking. The supply schedule is fairly decentralized, with investors and the team not holding a disproportionate amount of tokens. The supply will also be capped at 20 million IMX.
As far as the token supply schedule is concerned, it seems like months 9-12 will have aggressive unlocks. The antic- ipated circulating supply will quickly go up, so this could be a period where the price of IMX comes under signifi- cant pressure.
$IMX is not yet trading, but there has been an airdrop.
IOTEX ($IOTX)
84% code review // 81% fundamentals
IoTeX is an open-source platform founded in 2017 to build the Internet of Trusted Things, an open ecosystem where all “things” — humans, machines, businesses, and dApps — can interact with each other while ensur- ing maximum trust and privacy. It’s a full-stack platform to enable trusted data from trusted devices, for use in trusted dApps.
Backed by a global team of research scientists and en- gineers, IoTeX combines blockchain, secure hardware, and confidential computing to empower privacy-fo- cused apps and services to enable next-gen IoT devices, networks, and economies. IoTeX’s mission statement is about developing a decentralized economy by “con- necting the physical world, block by block.”
The “blockchain for IoT” ecosystem is rather crowded and there’s hardly a clear leader there, but IoTeX is defi- nitely one of the most advanced actors in the space. There are already a few products built on top of it, such as the private home security camera system Ucam, and the ecosystem is poised to expand. The project is clearly well-positioned to succeed. The road for adoption is still long here, but the team is putting out high-quality work and the public repositories are showing high activity.
Tokenomics and valuation
IOTX’s fully diluted valuation is $600 million. Considering the IoT sector, IOTX is slightly more expensive than the average valuation. But if we take Helium (HNT) as a com- parison — they are the sector leader — Helium valuation stands at $4.5 billion. If IOTX valuation catches up to HNT, ROI potential is north of 7.5x.
The demand side of the tokenomics is reasonably strong. IOTX has multiple use cases, including decentralized gov- ernance, gas fees, and staking for Layer-2 chains.
The supply side of the tokenomics is weak. More than 50% of supply allocation was distributed to the team, project, and investors. In the best case scenario, this should have been distributed to the community. This makes the net- work a bit more centralized, especially considering that the IoTeX network uses a Roll-Delegated-Proof-of-Stake (“Roll-DPoS”) consensus mechanism, where decentrali- zation is essential.
However, there is a bright side. Around 90% of the supply of the token is currently in circulation. From an invest- ment perspective, investors do not have to worry about large price dumps due to token unlock. The IoTeX network has also recently incorporated a “burn- drop” tokenomics design. This means IOTX will be burned for every new device (eg. Ucam) registered to the IoTeX Network, making the supply schedule deflationary.
IOTX and project tokens built on the network will also be airdropped to long-term IOTX stakers, which will improve the security of the network and be favorable for the net- work’s growth.
$IOTX is available on Binance. An IoTeX representative was kind enough to answer the following questions for us.
TOKEN METRICS: How long has the project been in development? What was day zero like? How big is the team? What’s it like now?
IOTEX: IoTeX started in 2017 with a vision to connect re- al-world devices and data to the blockchain universe. Four years later, we have built one of the finest block- chains in the industry from scratch, as well as comple- mentary IoT middleware to bring trusted data from trusted devices to our trusted dApps. The IoTeX platform is now powering 8,000+ devices and 20+ dApps.
Thinking back to 2017, all of the Layer 1 blockchains, in- cluding IoTeX, were pre-mainnet and working on prim- itives like consensus and smart contracts. It was a fas- cinating time — throughout the bear market from 2018-2020, the industry made incredible leaps in estab- lishing the underlying infrastructure that powers block- chain today. Newcomers to the industry have so many tools and, more importantly, confidence in the plat- forms they build on.
IoTeX is now a core team of 40+ with dozens and con- tributors and tens of thousands of devoted community members backing us. The next steps for IoTeX are clear — by bringing verifiable, real world data to the block- chain, we can use our real world actions and data from machines to trigger digital actions via blockchain. It’s an entirely new design space that will once again revolu- tionize our perception of what blockchain can do!
TM: How did you grow/develop your community? Care to share any learnings from along the way?
I: IoTeX had a unique start. While most projects in 2017 held public ICOs, IoTeX opted for a private sale to non-US accredited investors only. Of course this was for regula- tory purposes — in the long run it was the right move, but it put us at a disadvantage against projects that raised billions of dollars from millions of people on day one. We grew our online/offline community organically from scratch, getting boosts along the way in the form of Binance listings, CoinDesk features, meetups, hacka- thons, and more.
These days, many projects prioritize hype over sub- stance. I believe that crypto is about survival, not hype. As the crypto industry balloons from $2 trillion to $10 tril- lion or more in the coming years, carving out a niche of technology, partners, and community that truly believe in your vision is the staying power required to grow in our industry. Incentives can only buy you a window of awareness, but it cannot replace reality.
TM: Do you have a favorite use case for your project that you’ve learned about from a user or client? Whose work or life is different because they gained access to your project and started using it?
I: One of the biggest undertakings IoTeX has gone through is the launch of our first-ever device, Ucam. We started building Ucam in mid-2019 with our partner Ten- vis, a major security camera manufacturer, who we linked up with due to mutual desires to build a privacy-pre- serving device for consumers. As we learned, hardware is hard, especially when you combine it with first-of-its- kind blockchain technology. But we got through it and built something truly special — Ucam received the CES Innovation Award for Cybersecurity & Personal Privacy at last year’s Consumer Electronics Show (CES), is selling on Amazon.com and retailers like b8ta, and has 8,000+ users in 60+ countries. The camera uses a “your keys, your data” philosophy. To get technical, users log in to the camera and app using their blockchain identity, and Ucam end- to-end encrypts all videos with the user’s private key, meaning only they can decrypt and view them. Providing privacy for users around the world is a great feeling, and we plan to seek out more of it.
TM: Are there any popular misconceptions about your project that you’d like to clarify/set straight here?
I: The entire blockchain & IoT industry is quite misun- derstood by “normal” blockchain users and of course mainstream users. Many think all IoT data needs to be stored on-chain or that machines paying machines is what blockchain and IoT is all about. But they’re not see- ing the full picture — there are two ways to think about blockchain & IoT: how blockchain will impact the tradi- tional IoT, and how IoT will impact blockchain.
The former is quite obvious. Security and privacy and interoperability are native benefits of blockchain that would benefit IoT. Let’s talk about the latter — what would connecting devices and data from the real world to blockchains enable? This would allow us to use real world phenomena to trigger smart contracts, like a physical/digital IFTTT. We at IoTeX believe that devices/ machines with blockchain identities will be the biggest users of blockchains in the future, even more than hu- mans. Tamper-proof hardware and tamper-proof soft- ware synchronizing will enable tamper-proof applica- tions, which is what is required to reach the automated future we dream about.
TM: What does the future hold for your project? Where do you go from here?
I: The future is really exciting for IoTeX. We are gearing up for the launch of Pebble Tracker, our latest device that will stream asset tracking data (GPS, climate, motion, light) directly to IoTeX smart contracts. This will unlock an entirely new category of use cases that will connect the real world to the blockchain world like never before.
People can claim NFTs by being in a specific place at a specific time. People can use data from their wearables to prove their health and lower insurance rates. People can track their daily travels and sell their data over time to mobility enterprises or city planners. These are all active use cases we are working on with our partners, and once you think of blockchain and IoT as a horizontal technolo- gy that applies to virtually all verticals, things start to get really exciting. IoTeX is building the connected world.
OLYMPUSDAO ($OHM)
84% code review // 79% fundamentals
OlympusDAO has created a free-floating currency called OHM that’s backed by a basket of goods. The company’s mission is to create a stable cryptocurrency that can re- place or reduce the need for stablecoins pegged to cen- tralized currencies.
Their focus is to grow the supply of OHM (as well as its proliferation) by supporting an increased amount of as- sets to back it, as opposed to focusing solely on price ap- preciation. This approach is quite novel, but will ultimately require some level of adoption in order to accomplish its goal of being a practical, useful currency. That may prove to be quite difficult. In any case, OlympusDAO has court- ed some smart money: investors betting on success here include Mark Cuban, Nascent Ventures, D64 Ventures, Maven 11, and Zeeprime Capital.
Valuation and tokenomics
OHM has a fully diluted valuation of $2.4 billion. It is trad- ing significantly cheaper than the average valuation of the stablecoin sector and some blue-chip names like USDC ($33 billion) and Tether ($72 billion).
Compared to some non-pegged stablecoins like Float protocol (BANK) and Frax (FRAX), OHM is trading at a sig- nificant premium. Similarly, the market value of its treas- ury assets (which back OHM) is around $280 million, and OHM is trading around 9x more than the assets backing the network.
Despite premium valuation, we believe using OHM for yield farming and staking could be lucrative until the next quarter. The APY is currently 7,000%, implying one staked OHM today will net you approximately ~70 OHM in one year. Based on the supply of OHM, these yields could be sustained for around 282 days.
The main use case for the OHM token is staking and governance. Staking rewards have been so lucrative that around 94% of the token supply is currently staked. We believe the staking use case might not be sustainable, as it depends on the yields (emission of OHM supply). Olympus recently launched Olympus Pro, where OHM could be used as a form of tokenized liquidity in the fu- ture. This is a very strong use case similar to Tokamak, in our opinion.
Although the supply of OHM is uncapped and extreme- ly inflationary (decided by the community), we like that the supply is 88% owned by the community, making it very decentralized.
Based on OHM valuation and tokenomics, our verdict is to use OHM for short-term yield farming opportunities, as APY is lucrative and sustainable in the short term, as opposed to using OHM for a buy-and-hold strategy.
OHM is trading at a premium and will have wild price swings based on its tokenomics. Based on a simple game theory analysis (see below), the price should go higher if everyone is staking. Similarly, the price could drop sharply even if some selling starts as 94% of the OHM currently staked starts getting into the market.
$OHM is available on Sushiswap. An OlympusDAO representative was kind enough to answer the following questions for us
TOKEN METRICS: How long has the project been in development? What was day zero like? How big is the team? What’s it like now?
OLYMPUSDAO: It’s been in development since last sum- mer. Day zero was a couple of people ideating, and it started ramping up speed, especially since January. The team is 65 people, all working within the DAO structure.
TOKEN METRICS: How did you grow/develop your com- munity? Care to share any learnings from along the way?
O: The community grew organically from an IDO, we nev- er paid influencers. For example, the initial IDO was $500 USD and is now worth close to a million. Because the fo- cus was not on getting massive amounts of IDO funding, but more on building a community, this was extremely successful.
TM: Do you have a favorite use case for your project that you’ve learned about from a user or client? Whose work or life is different because they gained access to your project and started using it?
O: The store of value is the largest use case. Next to this, general exposure to DeFi (Aave and Convex with our in- vestments, but also partner protocols) is an extremely interesting value proposition for Olympus. If you tie that together with an amazing community (16,000+ strong on Discord) you get a lot of potential upside. I think all early investors, which are mainly the community, can be extremely happy with how Olympus is going. But also our contributors in the DAO, where people can make literally $10,000+ a month contributing.
TM: Are there any popular misconceptions about your project that you’d like to clarify/set straight here?
O: Yes, the high APY makes people think this is a ponzi scheme. That’s kinda weird, because in a ponzi, the last one holding the bag is fucked. With OHM, if you are the last one holding OHM you have a claim on a minimum 45 million, risk-free in the treasury. Please sign me up to be that person!
TM: What does the future hold for your project? Where do you go from here?
O: In the short-term we will launch new bonds, partner- ships, Arbitrum, and Olympus Pro. In the mid- to long-term we plan to become the (de)cen- tral bank of DeFi.
TOKEN METRICS INDICES PERFORMANCE REVIEW
Token Metrics subscribers enjoy access to our AI-driven indices, which are effectively model portfolios designed for max- imum profitability for those trading on a daily, weekly, or monthly basis. They are a sharp edge for traders to use in re- moving the emotions from their buying and selling decisions as they work to change their financial destinies. Let’s dig in to how these indices performed against the rest of the market for Q3 2021.
Over the past quarter, the crypto market bounced back from its lows following the market drop in May 2021. After a long period of consolidation in June and July, the market started to rally, led by Bitcoin and then followed by altcoins. Since July 1st, Bitcoin has returned 27%.
With the launch of TM Grade in July, TM indices improved and provided great risk-adjusted returns by comparison to just holding Bitcoin. This improvement let the indices gain exposure to the growth of multiple sectors, most notably the fan token and gaming sectors. Furthermore, TM Grade was able to capture some coins before their exponential moves, including Axie Infinity (AXS), Illuvium (ILV), Terra (LUNA), Solana (SOL), and many more.
In Figure 1 below, the performance of the best high-cap TM indices over the past quarter is compared against Bitcoin and the total crypto market cap. Similarly in Figure 2, the performance of the best low-cap TM indices is shown.
Figure 1: Best TM High-Cap Indices Quarterly Performance
One of the main drivers to the outperformance of TM indices was Solana (SOL), which was picked in the daily, week- ly, and monthly indices at an initial price of $35. Its TM grade remained above 90 all the way to $220, so it was still in the indices. After SOL reached its top, the TM grade decreased accordingly at around $180. By $160, it was out of TM indices. Figure 3 below shows the time-series data of SOL price vs. TM Grade to see how TM Grade behaves.
Figure 3: Solana Price vs. Solana TM Grade
Looking in more depth at the Quarterly High-Cap index in Figure 4, we can see how TM Grade has helped pick oth- er coins at very good entry points. It’s clear that Token Metrics’s grading and indices functionality has a role to play for profitably trading in the crypto markets.
Figure 4: Quarterly High-Cap Binance Index
