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Should You Buy OMG After Its Recent All Time High?

By Rich Smith – Nov 13, 2021 at 6:41AM

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The Bitcoin alternative took off like a rocket Thursday morning.

OMG (OMG 1.70%)! Has there ever been a better time to invest in cryptocurrency?

OMG Network coins -- which you may not even have heard of before -- surged to an all-time high of $18.90 Thursday morning, up more than 17% in 24 hours, according to data from CoinDesk.com. (Different data providers may show different results. CoinMarketCap.com, for example, which still lists OMG Network under its previous name "OmiseGo," notes that the crypto coin hit even higher valuations back in 2017 -- but it soon dropped steeply and didn't come close to regaining those prices until last week.) 

Row of dice read CRYPTO with a final die being flipped from a green arrow to a red

Image source: Getty Images.

What OMG is

The cryptocurrency's latest rise appears to be tied to a promise that, on Friday, OMG Network owners will "receive a new crypto token that can be staked for rewards on Boba Network," as my fellow Fool Keith Noonan reported last week. But more broadly, cryptocurrency investors are optimistic about OMG's strategy of building a "next-generation Ethereum Layer 2 Optimistic Rollup scaling solution that reduces gas fees, improves transaction throughput, and extends the capabilities of smart contracts." 

Translated into English, that works out to a faster, cheaper way of securely moving cryptocurrency around. 

Another of the cryptocurrency's attractions is the fact that, like Bitcoin (BTC 0.02%), OMG coins have a maximum supply limited to just 140,245,399 OMG coins in circulation. As investor and PayPal co-founder Peter Thiel explained last week, limited supply can be key to a cryptocurrency's long-term prospects, because coins with limited supply hold their value better in an inflationary environment. They are, to "coin" a term, a better store of value.

What OMG isn't

But perhaps perversely, this is the reason I am not convinced that OMG is a great cryptocurrency to buy.

CoinDesk data show that over the last 24 hours, the volume of OMG coins traded nearly equaled the total value of all OMG coins in existence. At current prices, OMG has a total market capitalization of $2.65 billion -- and $2.49 billion of that value changed hands since yesterday morning.

In just one single day, effectively every OMG owner sold their coins to someone else.

On the one hand, data like this suggests that OMG coins are very popular to trade as cryptocurrency traders chase momentum up and down in hopes of capturing short-term profits. High trading volume can also be an indicator of the ease of transacting in a coin, trading in and out of it easily.

But by the same token, this high trading volume makes one thing glaringly obvious: The last thing OMG traders are interested in is using OMG to "store value." Not for more than a few minutes at a time, at any rate.

OMG is not Bitcoin

Contrast OMG's volume performance to that of a more established coin like Bitcoin. Like OMG, Bitcoin is limited in supply -- no more than 21 million Bitcoins will ever be mined or circulated. Unlike OMG, though, less than 2% of Bitcoin's 21 million coins (or an equivalent value) changed hands over the last 24 hours. 

So if you want to trade cryptocurrency for fun and profit -- and treat the stuff like gambling chips in a casino -- OMG Network just might be the cryptocurrency for you. But if you are truly confident in cryptocurrency's role as a store of value and a hedge against inflation, Bitcoin might be a better bet.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

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