Friday, July 30, 2021
DeFi With Many Fish in the DeFi Sea, Throw Ethereum Classic Back

With Many Fish in the DeFi Sea, Throw Ethereum Classic Back

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After May’s crash, Ethereum Classic (CCC:ETC-USD) has been holding steady. This is in line with other altcoins, which have more or less been treading water during the same timeframe. Yet, while this coin, which is a fork of its better-known counterpart, Ether (CCC:ETH-USD), has shown some resiliency, don’t take this to mean that it’s set to make a major comeback.

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Big upside may still be in the cards for altcoins seen as “Ethereum killers.” That is, native coins of blockchains that offer scalability, speed, and transaction fee advantages over ETH’s Ethereum blockchain. But ETC even with its upcoming upgrades (more below), is still not bringing enough to the table.

It may have some DeFi (decentralized finance) capabilities. But not enough to make it a better contender than Cardano (CCC:ADA-USD), Polygon (CCC:MATIC-USD), Solana (CCC:SOL-USD), and the scores of other up-and-coming names challenging the more valuable coin that shares a common history with this one.

Investors may still see this as a coin that will produce outsized returns. But its potential to gain is likely not any higher than that of ETH. And, that’s assuming the other rising star names don’t gain more ground. As your other options remain much stronger, there’s little reason to consider this one in particular a buy.

Ethereum Classic and Next Month’s Magneto Upgrade

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On June 11, ETC’s developers announced a scheduled network upgrade, named Magneto, on July 21. This upgrade implements the Ethereum Berlin hard-fork upgrades onto the Ethereum Classic network. These upgrades provide improvements to transaction fees, as well as security enhancements.

Does next month’s upgrade change things much here? It may help maintain its capability with Ethereum. But it’s hardly going to move to the needle. As I’ve mentioned before, ETC has some DeFi capabilities. But it doesn’t have enough to make it a formidable competitor to the above-mentioned blockchains that are vying for the DeFi crown. Still living in Ethereum’s shadow, investors are going to have little inspiration to dive back in as they did in a big way just a few months back.

Sure, there is a path for Ethereum Classic prices to surge once again. If altcoins across the board start making a serious rebound, this one will likely go along for the ride. Some may even see this smaller/more illiquid one as a possible name that could generate outsized returns in such a bounce back.

Yet there’s little reason to buy ETC in lieu of ETH or one of the up and coming altcoins. If the other DeFi-friendly blockchains gain ground, their coins will outperform. If Ethereum holds its ground, this coin will at best likely see returns on par with its more valuable, and more liquid, counterpart.

Ethereum’s Rebound Potential

Altcoins may be holding steady. But so-called crypto dinosaur Bitcoin (CCC:BTC-USD) is trending higher once again. Now again trading close to $40,000 (and occasionally slightly higher over the past several days), it seems news of it becoming legal tender in El Salvador and Elon Musk warming back up to it have gotten it out of its slump.

Will a resurgence in enthusiasm for the established coin affect price action for ETH and the other altcoins? It’s possible in the near-term. But as InvestorPlace’s Luke Lango recently recommended, now may be time to buy altcoins like Cardano that have larger upsides as whales focus on BTC.

The whale-fueled rebound in Bitcoin prices may be at the top of crypto investors’ minds right now. But a rebound in altcoins as blockchain finance and DeFi gain critical mass looks to be likely as well. This bodes well for altcoins across the board. But it’s hardly an invitation to buy Ethereum Classic.

Why? Again, it has little to no edge against the other altcoins. These coins could see a much more rapid run-up in value, assuming their respective blockchains gain big ground against Ethereum. And even if they fail to dent that network’s dominant status, ETH could see a rebound back towards its prior highs. ETC may see a rally from this as well, but it likely won’t be an outsized one. If upside potential is at best the same, why not go with the surest bet?

Little Reason to Buy Ethereum Classic

Some may still see ETC as a “cheaper” alternative to ETC. But there’s a reason why this coin trades at a fraction of Ether’s value. Instead of implementing upgrades that could make it a faster, cheaper and more scalable blockchain, it’s still living in its more successful alternative’s show.

It’s still failing to differentiate itself from other altcoins. There’s little potential for it to outperform its famous counterpart. With little on its side, there’s not much reason to buy Ethereum Classic.

On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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