- Scott Melker has been investing in crypto since 2016, and is focused on long-term projects.
- He’s bullish on Layer-1 blockchains that can compete with Ethereum, allowing smart contracts.
- He believes each platform will specialize in a niche while working alongside other blockchains.
- See more stories on Insider’s business page.
Altcoin season seems to be in play as some cryptocurrencies such as ether (ETH) are rising towards their all-time highs, while others such as cardano (ADA) are hitting new peaks.
Price peaks create a buzz, often drawing new people into the crypto space. The frenzy creates a rush of excitement, with first-time investors scrambling to figure out where they can throw their money and take positions.
But those who’ve lived through a few crypto cycles know not to get caught up in the FOMO. Scott Melker has been investing in crypto since 2016, and now has a podcast called “The Wolf of All Streets,” a nickname he goes by. He’s also the author of The Wolf Den newsletter. Melker plays the cycles but knows how to mitigate risk.
“I believe that investors in crypto should have basically 70% of their portfolio and investments that they rarely touch in long-term [investments], 15% in cash, and 15% for trading and investing in smaller caps and riskier projects,” Melker said. “So even if they all blow up at once, you’re really only risking 15%.”
For Melker, that 70% consists of bitcoin and ethereum, while the rest of his portfolio holds a mix of other digital assets. But even when it comes to new projects, Melker is a long-term holder. That’s why he is bullish on cryptos that are tied to blockchains with a strong use case. So he takes his gains and reinvests them into riskier bets.
“I do believe that if you have patience and you’re willing to ride the volatility, investing in these assets now is the largest upside opportunity that we’ll see in our generation,” Melker said.
The widely used term for investors who buy and hold their positions long-term and regardless of price is hodlers. It’s an acronym that refers to holding on for dear life.
In an interview with Insider, Melker shared six altcoins that he’s bullishly holding onto, and explained why he believes they have the ability to stick around for the long haul.
Melker says once you’ve bought bitcoin, the next crypto should be ethereum, especially after the recent EIP-1559 update which flipped the blockchain into a hybrid system of base fees and tips, burning ethers with every transaction.
The update means that approximately 200 ETH or $643,000 is burned every hour. The process means ETH is now a deflationary digital asset.
Melker adds that most NFT and DeFi projects are also being built on Ethereum’s blockchain. In 2021 alone, the NFT art market has taken rapid strides. Sales volume shot up to $1.23 billion in Q1 and $1.24 billion in Q2, compared to Q4 2020 which only saw $52.92 million, according to the data provider DappRadar. Creators and buyers of NFTs use ETH to trade the projects.
From there, Melker says he’s very interested in all of the other layer-one solutions that are theoretically Ethereum competitors. That means any blockchains that can have DeFi and NFT projects built on their networks are on his radar.
“If you step back, you look at the Ethereum, which is a layer-1 and it’s effectively like investing in the internet in the 1990s. It’s the platform that everything is being built upon. Well, there are Ethereum competitors,” Melker said.
Each of them has its own value proposition and is faster and cheaper than Ethereum, says Melker. But he notes that just because they can run similar protocols doesn’t mean they will replace Ethereum.
This blockchain is dubbed the fastest in the world and the fastest-growing ecosystem in crypto, according to its website. Solana also supports smart contracts for NFTs and DeFi.
“A lot of the metaverse and gaming ecosystems are being built on Solana, which I really believe are one of the major future use cases of blockchain and crypto,” Melker said. “The fact that so many of these projects are choosing Solana is a testament to how fast and cheap and efficient it is as a blockchain.”
SOL has had a staggering year of growth and is up by an astounding 6,473% year-to-date. It started January at a mere $1.78, but as of August 31, it’s trading at around $117.
Avalanche is an open, programmable smart contracts platform for decentralized applications that can process thousands of transactions per second. The project dubs itself as low-cost and eco-friendly.
A recent bridging mechanism built by developers allows DeFi users to transfer their assets between Avalanche and Ethereum’s blockchains.
“What’s interesting about Avalanche is that it offers all the things we’re talking about with Ethereum and Solana, but what it also offers is the ability for individuals and companies to build their own blockchains that can be either private or public,” Melker said.
AVAX’s price hasn’t seen steady climbs. So far, the crypto has been extremely volatile, reaching peaks as high as $59 in February and then hitting lows of about $9.36 as recently as July, before tracing back to its previous highs this month.
Elrond is self-described as a blockchain built to provide a “scalable, fast, and secure blockchain platform for distributed apps” and enterprises.
“They’re seeing mainstream adoption as a payment solution for music festivals in Europe [and] they’re moving into the NFT space,” Melker said.
EGLD has also seen volatility in its price throughout 2021. It started the year off trading at around $26. At its peak in April, it hit as high as $243 before dipping to $62 two months later. As of August 31, EGLD was last trading around $159, according to CoinMarketCap.
Both Ethereum and Polkadot have similar transaction protocols that automatically execute, control, and document legally relevant events on their blockchains.
But Polkadot has a one-up on ethereum because it can bridge and interact with other blockchains. This means additional applications don’t need to be built into its platform, like Ethereum, but instead can be connected by a bridge.
Keith Bliss, the president of Capital2Market, a firm that provides technology solutions to the financial sector, understands the impact these technologies will have on the DeFi sector, and is also very bullish on Polkadot. He recently predicted DOT’s price would rise as high as $100 within the next three years.
DOT’s price is up by 245% year-to-date. The crypto was last trading at around $31 as of August 31, according to CoinMarketCap.
Cosmos’ blockchain is a decentralized exchange that can swap digital assets from across the interchain with minimal fees and quick confirmation.
It connects to platforms by using the Inter-Blockchain Communication protocol, an end-to-end, connection-oriented, stateful protocol for reliable, ordered, and authenticated communication between sovereign blockchains.
Melker is a huge fan of Cosmos because it creates easy interoperability between the various blockchains, allowing each platform to find a niche while working together.
In May, ATOM peaked at almost $30 before falling by as much as 73% by June. As of August 31, the crypto was trading at around $24 according to CoinMarketCap.