Who better to ask about the surge in bitcoin and those funky digital crypto art projects everyone's talking about than the folks who wrote the book on "How to Bitcoin"?
That's CoinGecko, which bills itself as one of the world’s largest independent cryptocurrency data aggregators. The firm tracks price, market capitalization and other metrics on a dizzying number of crypto projects -- some you've heard of and others with space-age names you likely haven't. (Fantom and Voyager Token, anyone?)
Based in Kuala Lumpur, the service was launched seven years ago to provide fundamental analysis of the crypto market.
"Back in 2013, there weren’t enough cryptocurrency resources available to do research in the market," Bobby Ong, CoinGecko's chief operating officer told TheStreet. So, he said, he and CEO TM Lee "brainstormed on a few ideas" and eventually decided to build the crypto-data aggregator that today is CoinGecko.
After years of hard work and "hustle," CoinGecko is now one of the top 500 most visited websites globally, scoring 200 million page views in February, said Ong. The firm has also put out two books on crypto, "How to Bitcoin - Beginner’s guide to Bitcoin" and "How to DeFi - Beginner’s guide to Decentralized Finance (DeFi)."
TheStreet interviewed Ong about the state of crypto, his views on hot crypto projects like those digital art "non-fungible tokens," the risks awaiting novice investors, and why bitcoin could hit $100,000 this year. Following is a lightly edited version of the exchange, which was conducted over email.
TheStreet: We are hearing a lot of chatter about how bitcoin could reach $100,000. How likely do you think that is?
Ong: I think Bitcoin reaching $100,000 is very likely to happen this year, because traditional institutions have started investing in bitcoin recently. MicroStrategy and Tesla (TSLA) - Get Report have opened the floodgates by showing how corporations can hold bitcoin on their corporate treasury to hedge against inflation. Now every CFO is researching bitcoin, and it is no longer considered career suicide to suggest bitcoin as an investment strategy. The upcoming Coinbase initial public offering, valuing Coinbase at around $100 billion, will also provide another catalyst to promote bitcoin amongst institutional investors and will likely prompt more bitcoin buying.
TheStreet: Jumping off that question, are people so focused on bitcoin that they are failing to see the upward trends in other cryptocurrencies?
Ong: Bitcoin has successfully captured the “digital gold” narrative. When central banks are printing trillions of dollars in stimulus, it is not surprising that institutional investors would be looking for alternatives to retain the value of their money. This is just the beginning -- investors will need to go through a learning curve before considering other cryptocurrencies such as Ethereum.
Regardless of the trend, bitcoin remains a dominant asset in the crypto space with a 60% market capitalization dominance. Bitcoin is still the reserve currency in the crypto space, and the prices of most cryptocurrencies are highly correlated with bitcoin’s price.
TheStreet: So, what are the cryptocurrencies in particular you think people should watch most closely right now and why?
Ong: For newcomers to the space, I would recommend learning about bitcoin and ethereum as a starting point. Once the newcomers have understood the value of both, they may consider looking into the decentralized finance space, as many of these projects are very innovative and provide valuable financial services in a decentralized manner.
TheStreet: We're also hearing a ton about non-fungible tokens, and other related crypto projects. What do you see as most compelling right now -- both in terms of its value for investors, but in terms of its underlying technology that could be used for other purposes?
Ong: NFTs are fast becoming the gateway drug to the crypto world, as many artists and creators are warming up to the idea of launching their creations directly through crypto platforms. For decades, the power of art lay in publishers’ hands, but now it is time for artists to take back control of their own products. This concept behind NFTs will not just upend the creative industry, but also allow for more creative usage such as digital identification, supply chain management, and gaming multiverse. I also foresee blockchain to be a core part of the acceleration towards a fully immersed digital world.
TheStreet: Is there anything you feel readers should really know about crypto right now but no one is really talking about?
People are not accurately emphasizing the risks involved in the crypto space, especially now that many retail investors are entering the market. - Bobby Ong
Ong: People are not accurately emphasizing the risks involved in the crypto space, especially now that many retail investors are entering the market. Almost everyone seems to be fascinated by the crazy returns that others have made from the recent run-up, but there is a lack of exposure as to what happens when things go wrong.
The crypto space is not just a place to make a quick profit, because there needs to be plenty of research and due diligence before jumping in. One should not simply listen to hearsay, but spend the time reading up on the project fundamentals like whitepapers and project use cases before purchasing any cryptocurrencies.
Users should also be aware of the risks involved when interacting with smart contracts. Some smart contracts can be exploited, and this may potentially lead to the loss of funds. As the saying goes, “don’t put money that you are not willing to lose into crypto.”
TheStreet: Finally, could you talk about why investors should care about "total value locked" -- a measure often tracked in the crypto world -- and what other indicators they should be watching when evaluating cryptocurrencies?
Ong: In traditional finance, the price/earning ratio (P/E) is the most quoted metric for valuing public companies. In the current decentralized finance ecosystem, protocols are beginning to have token cashflow, thus starting to resemble traditional companies. In some protocols, the token cashflow will go to token-holders, and this is where using metrics will be helpful when valuing and comparing these projects.
With that in mind, total value locked (TVL) is one of the most popular metrics used by crypto analysts when doing the valuation for these projects. TVL refers to the amount of capital locked inside a particular protocol. In most cases, the capital locked is used to offer services such as market making, lending, asset management, and arbitraging across the ecosystem, earning yields in the process.
A high TVL can be used as a proxy to indicate good product-market fit and is one of the most widely cited metrics to infer future sales and/or earnings of a protocol. However, one should be aware that a high TVL can be subsidized through liquidity mining programs and should not be the only metric used.
Crypto investors should also pay attention to other metrics such as "fully diluted valuation" (FDV), market capitalization/TVL, and FDV/TVL. Investors should compare these metrics across other projects in the same sector and draw their conclusions. These metrics are available on CoinGecko and should be used as a starting point for initial research before going deep into other more project-specific metrics.
This story has been updated.