Bank of America now sees the cryptocurrency sector as too large to ignore.
"We believe crypto-based digital assets could form an entirely new asset class," Alkesh Shah, the bank's head of crypto and digital assets strategy, said. "Bitcoin is important, with a market value of around $900 billion, but the digital asset ecosystem is so much more."
Shah's report marked the beginning of Bank of America's formal coverage of the sector, with the bank estimating that 221 million users trade a cryptocurrency, or use a blockchain-based application, each month. Digital asset-related venture capital funding rose to $17 billion in the first half of 2021, compared to just $5.5 billion last year, and mergers and acquisitions jumped to $4.2 billion, up from $940 million in 2020.
The bank has introduced developer interest as one potential metric to measure whether a coin or token is over- or undervalued. Analysts said this demonstrates the dominance of the ethereum network and its native token, ether.
"We view the number of repositories, or projects, on a blockchain as an indication of developer interest and future demand for the blockchain's native digital asset," Shah said. "We define projects as the total number of blockchain-based code repositories."
"There are more ethereum projects currently being worked on than there are for polkadot, cardano and XRP combined," he added.
Insider lists 15 little-known altcoins that the bank identified using this same metric. To qualify, a token needs to fall outside of the top 15 by market capitalization, and not be a stablecoin. Bank of America defined an altcoin as any cryptocurrency that isn't bitcoin.
Shah's team identified 15 potentially undervalued coins, based on their technical applications and developer interest.
"The total number of projects per blockchain provides a measure to gauge network effects," Shah said. "Put simply, a large or growing number of people involved in developing a network tends to inspire future developers to join because they can benefit from those already in the network."
Tezos was the first altcoin the bank listed. It runs on a proof of stake blockchain network, and is designed for peer-to-peer transactions and smart contracts.
Next, Bank of America listed The Graph. This token runs off of the GraphQL programming language, and was originally developed by Facebook in 2015.
IOTA is a centralized coin that achieves consensus without using fees and is used to process microtransactions. It has received some criticism for its unusual design, but is currently used by almost 500 developers.
The NEAR Protocol is an open-source platform that aspires to climate neutrality; it ranked fourth on the bank's list of smaller altcoins.
EOS is the native token of the EOSIO network, which allows users to build DeFi applications and has a market capitalization of just under $5 billion.
The bank also listed Stellar's native token, XLM, which has a current market value of $8 billion. Shah's team described Stellar as "a payments solution with low and flat transaction fees".
The little-known privacy coin XMR, which runs on the Monero blockchain, also made the bank's list. Monero - a so-called "privacy coin" - increases user anonymity, which has led to some concerns about potential illicit use.
Ethereum Classic, which was created following an ethereum hard fork, has a market value of just over $8 billion. Shah said "ETC provides holders with the ability to store and transfer value and pay gas fees and, unlike ether, has a supply cap."
Cloud-based blockchain Filecoin's utility token FIL has a similar market value of just under $8 billion. It runs using the unusual Proof of Replication and Proof of Spacetime algorithms.
Neo also made the bank's list. This blockchain, which processes smart contracts amongst other applications, is currently in the middle of the N3 upgrades, which it promises will be its "biggest evolution" yet.
Cosmos is one of the better-known altcoins listed by the bank.Crypto trader Michal van de Poppe recently tipped it as the 'next solana'. App-building blockchain Waves also made the list, along with the open-source DeFi platform Fantom.
Content sharing and entertainment platform Tron, which has a market value of almost $6.5 billion, was also featured by Shah's team. Its native token, TRX, allows holders to pay for streaming services on the platform.
Lastly, Bank of America listed Internet Computer's native utility token ICP, which has a market value of $10 billion. Holders can receive rewards for operating data centers and for voting on governance proposals.
The bank concluded that these 15 altcoins are part of an expanding group that are chipping away at bitcoin's dominance. Bitcoin's market value accounted for 97% of the crypto space in November 2013, but that figure has now fallen to under 45%.
"You've probably heard of bitcoin and ether and maybe several others, but there are actually over 11,500 altcoins in circulation," Shah said. "As the digital asset economy expands, the market share of altcoins has expanded significantly, capturing bitcoin market share."
"In fact, there are now around 100 coins valued at over $1 billion, which we view as a sign of an expanding ecosystem," he added.
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