Is NEO a Good Investment? – NEO Analysis

I will be taking a look at NEO to see if this coin could pose a good investment opportunity for anyone who’s interested in betting some money on crypto.

bulltrap-is-neo-a-good-investment

In this brief analysis, I’m checking out the fundamentals, its mission and purpose and how it compares to its largest competitor (Ethereum) in certain areas that could be measured.

Apart from examining the fundamental strength, I will verify the social side of things in terms of the community support it draws, and the development progress of the project including the team behind it.

Let’s get to it!


What is NEO?

Whilst this article isn’t going in-depth of what NEO is all about, nonetheless, I feel like a short description is due.

NEO is an open-source network that aims to digitalise physical assets by creating a smart contract-based ecosystem with the use of a distributed ledger (blockchain).

The smart economy that the coin is proposing break down into three main aspects: smart contracts, digital identification and dApps.

Unlike Ethereum, NEO doesn’t use neither proof-of-work (PoW), nor proof-of-stake (PoS). Instead, the blockchain runs on the delegated Byzantine Fault Tolerant algorithm (dBFT), enforcing the network consensus through proxy voting.

I will be discussing how this could shape NEO as a viable investment later on in this article.

By know, you should have a good understanding what NEO is made of. As you can see, it’s awfully similar to Ethereum and that’s the reason why it’s gotten itself a “Chinese Ethereum” nickname.

Moving forward, let’s take a look at what problems this concept solves and how it compares to Ethereum.


target-iconWhat problems does NEO solve?

Again, I won’t be going in detail on all the problems NEO tries to solve, but I will cherry-pick the ones that could have an impact on NEO’s future as an investment.

First and foremost, NEO has focused on tackling the biggest problem of them all — the blockchain scalability issue. In theory, blockchains should run at a higher capacity than they are able to handle practically.


prediction-iconProblem 1: Scalability

For example, Bitcoin was supposed to handle about 7 transactions per second (TPS) whilst in reality, it barely manages to digest 3 TPS when the network is congested — hence the Lightning Network was proposed to act as a second layer on top of Bitcoin’s protocol to allow for transactions to be carried out away from the blockchain.

To put that into perspective, Visa is capable of processing about 56,000 transactions per second. The same issue goes for Ethereum that theoretically shouldn’t have any problems handling about 30 TPS, but due to the network congestion, it does less than half of it.

NEO, on the other hand, because of its innovative dBFT algorithm could process transactions much faster than Visa itself and that’s mostly due to a state channel that in theory should allow for 100,000 TPS.

Note that this solution isn’t ready yet and these are just the plans, but nonetheless, it looks like NEO might have stumbled upon a plausible solution.

This will definitely add value to the coin from the investor’s point of view — should it materialise and be implemented without compromising the level of decentralization or imposing other price-driving issues.


dapp-iconProblem 2: Smart contracts & dApps

I’m not a developer, but I can understand the frustration of coders that dislike Solidity. Solidity is the programming language that’s used to create smart contracts on Ethereum.

NEO goes a step further and removes this inflexibility by allowing a good number of other programming languages to be used to interact with the network, including Java and C++.

At first glance, it might not look like a big deal. But it lets more coders to simply switch to NEO if they don’t wish to learn Solidity. Every coder seems to have their favorite language to code in, and if that language isn’t Solidity, this might inflict unnecessary friction.

Nonetheless, Ethereum enjoys much more traction in the development progress on GitHub in comparison to NEO which defies this argument. However, it’s something I like to keep an eye on and follow this metric to 

spot any possible trend-forming shifts.


Brand change

You might wonder what the gap above in the NEO development is, and that’s because NEO started off as AntShares, and only rebranded in June 2017 to what’s it’s currently called.

neo-antshares-rebrand

This skews a few important metrics in various areas such as GitHub development, social following or the amount of information found on NEO as opposed to AntShares and it makes it tricker to draw certain conclusions, especially when making a comparison.

However, despite that fact, you can still compare NEO against its competitors from the moment the name was changed.

Does the name change have the influence on NEO as an investment? I personally don’t think so. It’s been quite some time since it happened, and most people don’t mention AntShares any more. I can’t possibly see how this would have a negative impact on things.


hierarchy-iconSocial & Community

There’s not a lot of choice when it comes to measuring how active a community is. Tools such as Twitter hashtag count are usually hype-driven, especially when there’s a dispute between programmers or a crypto war of similar nature which might give off a false reading.

I’ve been exploring most social platforms including Slack, Gitter and Reddit where the crypto conversation seems to be active the most, and out of all of them, Reddit seems to be the most reliable metric.

Here’s how both communities, that is NEO and Ethereum, compare together in terms of the growth of each subreddit vs time. It’s a great way of determining trends which could be an excellent way to conclude certain things.

What I’m looking for in the chart above isn’t exactly the total number of people subscribed to each subreddit, but the rate of growth at which both communities become larger. It’s only fair to do it this way, unless both coins were launched around the same time.

Above, NEO had been shadowing Ethereum up until February 2018 which indicates a similar growth. Nonetheless, the pace had slowed down rather drastically and remained in an extremely flat trend ever since.

Is NEO bearing the brunt of the bear market? Most definitely. February is the month when Bitcoin dropped to $6,000 and brought all the altcoins down with it.

But then you have to ask the question — if Ethereum was able to maintain an uptrend in the growth of its community, why NEO didn’t?

This is undeniably an interesting finding and whatever the reason, it’s a sign of weakness and that’s something to keep in mind as an investor.


Market cap & ATH

Another things to consider in terms of the investment is the market capitalization and the all-time high of NEO.

The first one will determine if it’s actually possible for the price to break above certain levels. I will be looking at the maximum supply vs circulating supply because it’s a good indicator to answer this question way in advance.

For example, if coin X is worth $0.01 each and has a total supply of 100 billion coins and all of these coins are in circulation, it means that the total market cap sits at $1 billion as of today.

If this is your future investment and you’re banking on this coin to climb to $1 one day, it means that coin X would have to have a market cap of exactly $100 billion.

The fact that the total market cap of all crypto as of today is $130 billion, it tells you two things: it’s impossible for coin X to reach $1 any time soon if at all; and two, the total market cap would have to be well over $1 trillion for this to happen.

supply-vs-price

As a general rule of thumb, take this — the higher the max supply, the more difficult it will be for the price to go higher because it imposes a bigger market capitalisation.

Any by contrast, the smaller the supply, the higher the price goes.

Now it’s up to you to figure out if this is even possible and if it is, how long it’s going to take. One way of learning whether it’s possible or not is to look up a coin’s all-time high.

Since coin X is an imaginary coin and we don’t have any info on the ATH, it makes it extra risky.

Also, nobody can time the market, but at least you can eliminate any unrealistic expectations right at the start — or better yet, get rid of such a coin from your investment shortlist altogether.

Going ahead with the same logic, let’s take a look at NEO.


market-iconIs NEO capable of going past $200?

Because the all-time high of NEO is known, the job is much easier. NEO had peaked at around $200 in the recent run up with the market cap of nearly $13 billion.

NEO has a max supply of 100 million coins and at the time of writing, 65% of them are in circulation. It’s worth mentioning that if you’re to compare an ATH vs market cap from the past, you go a step further and verify how many coins were in circulation at that time.

The reason you want to go in-depth on this is the fact that the findings might be skewed due to a smaller number of coins being in circulation at the time of the all-time high.

Since NEO has a reasonable amount of max supply, it is able to far exceed its previous high as long as the total crypto sphere moves along with it. I can’t possible see NEO going back to these levels on its own, so it’s safe to say that next time the price is about $200 will be in the next bull cycle.

neo-all-time-high

Nonetheless, since NEO is trading at $8 per coin at the time of writing this, it poses a potential profit of 2,400% had it gone back just to the previous highs. I’m saying just because there’s most definitely room for more. 

This fact alone could supersede all the research, because even if you were to risk a mere $1,000 on NEO, it would have generated $24,000 in gross profit. And that’s some profit to be made without risking a fortune.

However, there’s a subtle difference to be mentioned here — it could supersede the research from the investor’s perspective that operates on a cyclical time horizon such as liquidating the position near the top in the next bull market.

It doesn’t mean that the project itself is without any flaws and is bound to succeed. It’s too early to render that judgement and things should become clearer upon successful implementation of the state channel and other ideas from NEO’s roadmap.

Nonetheless, it’s an interesting project with a lot of fight to bring to Ethereum, and I’m categorically following this development long-term.


Putting it all together

Apart from Ethereum, EOS and until recently Tron, there’s not much competition when it comes to smart contract-based projects.

Add the popular generalization that China likes to have their own but closely similar version of things (Google, Facebook, Mercedes etc.), it’s likely that NEO isn’t going anywhere for a long time.

chinese-mercedes

Also, taking into account the conclusions from this analysis and somewhat above average fundamentals, and despite it’s always been in the shadow of Ethereum, NEO could be in fact a good investment.

It certainly has the right amount of max supply to yield a reasonable market cap, and the all-time high of $200 could be far exceeded.

Will I personally pull the trigger on NEO? I already have — back when it was called AntShares. I’ve enjoyed the ride from $4 to the ATH and then back down again, selling some of it along the way.

Now, I’m accumulating more and HODLing the rest.

But the real question is — will you pull the trigger?

Good luck!


Tip jar:

BTC – 3DsiPb26ugH4N7urkq6P3T9meSp2NMNqan

ETH – 0x2F678cF4A0bc4B2D6F4e22A3A1bfC4BA746BDDBe

LTC – MU4iw9ydysAu9egDsp6gmiQ45DX6ujYBqQ

Disclaimer: You should do your own due diligence, research and analysis before you invest any money in cryptocurrencies. Cryptocurrencies are highly volatile and classed as high-risk investments. You should never invest any money unless you’re prepared to lose your capital. The author of this article holds the said assets and might be biased towards them.

Tagged with: |

Leave a Reply