Market analysis suggests a bullish outlook for the privacy coin Monero; the XMR price having gained nearly 70% in the past three weeks.
Monero has increased just over two-thirds since mid-August, with significant gains being made since the start of September. The XMR price stood at $97 at the end of last month but climbed to nearly $140 by the beginning of Tuesday. The coin was worth $138 at the time of writing.
This means Monero’s market cap has increased by just under a billion dollars in the past three weeks, from $1.3bn to its present valuation of $2.27bn.
Monero is a privacy coin: transactions on the network remain confidential between parties using ring signature cryptography. This hides information including users’ identities, the amount sent as well as when the transactions occurred. The protocol is Proof-of-Work and uses the hashing algorithm, CryptoNote, making it ASIC resistant.
Behind the XMR price
Satis Group, an ICO advisory and research firm, recently published a report predicting the crypto market over the next decade. The company’s analysts predicted that Monero could experience a surge of demand from investors which could potentially make each coin worth as much as $18,000 in the next five years.
Satis said the anonymity offered by privacy coins made them the asset of choice for crime or activities frowned upon, like tax avoidance. The company said they had detected early signs of adoption, with Monero being used to pay ransoms as well as launder money.
“They [privacy coins] present a much deeper value proposition within those markets,” the report said. “Recently, we have already seen early signs of adoption by some of these cryptoassets; ransoms being posted to large corporations where even BTC could be tracked and was not the preferred method, money laundering, and asset shielding.”
The analysts predicted that Monero could constitute approximately 60% of the market, with Zcash (ZEC) making up around 30%. Monero’s active codebase development, as well as its ASIC resistance, were key attractions; that XMR tokens are fungible (mutually interchangeable) could also lead to widespread adoption.
Does Monero have a legitimate use case?
Hiding money is big business. The true scale of offshore deposits was revealed in 2016 when the leaking of the Panama (or ‘Mossack Fonesca’) Papers showed well over 200,000 companies and rich individuals, including the Prime Minister of Iceland, had sent money overseas to avoid tax.
Although Bitcoin was once feted as a coin that kept transactions confidential, the authorities have since caught up. The security firm Chainalysis is able to infer enough information from the network to determine the identities of both sender and receiver as well as the amount sent.
Initially focused on BTC, the company announced back in April that it was now able to track transactions on Bitcoin Cash (BCH) and other coins.
A recent report, An Empirical Analysis of Traceability in the Monero Blockchain, suggested that around 80% of Monero transactions could actually be tracked down. If anonymity is driving the Monero price, this harsh (and little-publicized) reality could put a dent in it.
A clear and viable use case is the key for a strong price rise; peer-to-peer coins looking to replace the dollar are unlikely to gain significant traction.
Although Satis doesn’t seem satisfied privacy coins have any legal use-case, the Cambridge-Analytica scandal highlighted the amount of data large corporate leviathans, like Facebook and Google, have on their users. This publication has argued previously internet anonymity is important, not just for the sake of privacy but to protect confidential information and even citizens in oppressive or dictatorial regimes.
Economic empowerment is stripped when central authorities devalue a national currency: this situation is playing out around the world today, and it’s causing citizens in multiple countries to adopt cryptocurrency at an unexpected rate. An anonymous coin is an obvious harbor against government fallibility.
Chainalysis, which works in partnership with law-enforcement bodies, had already suggested it could expand to track transactions on the Ethereum (ETH) and Litecoin (LTC) networks.
This week’s surge in the XMR price came off the back of the Satis report. Governments can’t really ban Monero (how do you determine who has XMR?), but a legitimate use-case will help the wider reputation of the crypto community.
The author is invested in BTC and ETH, which are mentioned in this article.