It's quite possible that the cryptocurrency gains witnessed by investors between the start of 2017 and first week of 2018 could go down as the most robust for a single asset class over a roughly one-year span in history. In a 53-week span, the combined value of all virtual currencies exploded higher by more than 4,500%. Good luck finding returns of that nature in a one-year time frame from any other asset class.
However, parabolic gains have also ushered in mind-numbing volatility. Since hitting a high of nearly $20,000 per coin in December, bitcoin, the world's most popular digital currency, wound up losing more than half of its value and dipping briefly below $10,000. Though bitcoin has rebounded from its lows, it's still down by 28% since Jan. 7 (through Jan. 28), when the combined value of cryptocurrencies hit an all-time high of $835 billion.
As bitcoin plunged, these under-the-radar digital currencies soared
As you might have imagined, with bitcoin being the face of the crypto revolution, most virtual tokens tend to follow its lead. In other words, the virtual currency market tends to move up and down in unison with bitcoin. But in the three weeks following Jan. 7, three lesser-known cryptocurrencies have bucked that trend. While bitcoin has plunged, the following three digital currencies have soared.
1. NEO: Up 48%
Arguably one of the top performers in recent weeks is NEO -- and no, that's not a Matrix reference. NEO, which was founded by Da Hongfei in China, a country known for its harsh stance on cryptocurrency trading and mining, has jumped 48% in a three-week span and positioned itself to become a direct competitor to Ethereum.
For those unfamiliar with the buzz behind Ethereum and most cryptocurrencies, it primarily has to do with the emergence of blockchain technology. Blockchain is the digital, distributed, and decentralized ledger responsible for recording all transactions. Most proprietary blockchains today are built on or around Ethereum's blockchain. Not surprisingly, 200 organizations worldwide are testing Ethereum's blockchain in small-scale projects and demos. NEO is hoping to take the best components of Ethereum, which includes its smart contract protocols, to create an even faster and more efficient network.
You see, unlike most cryptocurrencies that have a decentralized network and a huge community, NEO's coin isn't minable. Instead, its developers still control quite a lot of the circulating NEO supply, and are only using seven nodes to validate blocks of transactions. In plainer English, it's more of a centralized cryptocurrency at the moment. However, that means decision-making is done considerably quicker than Ethereum's network, and NEO has touted the ability to process up to 1,000 transactions per second. Da Hongfei has suggested that NEO could move to more of a decentralized community platform in the months or years to come, but is more focused on gaining partners to test its technology for the time being.
2. VeChain: Up 48%
VeChain, which also logged an impressive gain of 48% over a three-week period, is a blockchain-as-a-service company focused on weeding out problems in supply chain management, as well as supporting Internet of Things networks. VeChain's blockchain is a great reminder that there are plenty of applications beyond currency. In particular, two news events appear to have driven this monstrous gain.
First, VeChain and DNV GL, a global provider of assurance services, recently announced a partnership designed to increase supply chain transparency from the factory to the consumer. Rather than simply relying on an independent third-party like DNV GL to monitor product quality and corporate accountability, the addition of blockchain features, along with the utilization of Internet of Things devices embedded within a product, can allow for clearer insight into a product's history or performance.
Second, on Jan. 21, the VeChain Foundation announced that VeChain became the first ever to pass the Cryptocurrency Disaster Recovery Plan (CDRP), according to PwC. In other words, the VeChain Foundation identified various types of threats based on likelihood and severity, and developed control procedures to protect crypto assets. In becoming the first cryptocurrency to pass a CDRP, VeChain may have demonstrated to retailers, distributors, and logistics companies, which would be its bread-and-butter clientele, that blockchain can be perfectly safe for mass adoption.
3. Populous: Up 36%
Finally, Populous has been quite popular among crypto enthusiasts over the past three weeks, gaining 36% in the process. Populous is a peer-to-peer platform built on the Ethereum blockchain that uses smart contracts to provide small- and medium-sized businesses with invoice financing solutions. Since late invoice payments can cost small businesses money and compromise their cash flow, this platform allows these businesses to sell their invoices at a discount to receive a faster payment. In return, the buyer of the invoice receives the full amount when the clients pays their bill. It's a win-win for both parties.
One of the more interesting aspects of the Populous platform is that it's able to analyze the credit risk of invoices using the Altman Z-score formula and real-time XBRL data. Since this data is publicly available, the Populous team has been able to create its credit rating system. Without the need for an external credit agency, time and money is saved.
Thought PPT tokens have taken off in January, there are no specific recent events to indicate why. Populous did announce a blockchain-based invoice finance platform partnership with Luxure Global Citizen at the beginning of September 2017, and has carried momentum from that deal ever since. However, with the exception of the fairly recently announced Populous Data Platform moving into beta testing, which will offer advanced features that include credit reports, there hasn't been much in the way of major news over the past two months.
Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool has a disclosure policy.