Privacy coins under the radar: Monero and Dash
Last week, I discussed two altcoins I believe are currently underperforming against Bitcoin and which might surprise us in the near future in terms of price action.
Today, I will focus on another set of coins usually associated with higher privacy and anonymity. These coins are commonly known as “privacy coins”.
If you’re into these coins for the ability to transact privately without anyone knowing where your money has been, you should know there is an additional feature of privacy coins that is even more important in terms of functionality.
The two cryptocurrencies I will discuss today protect fungibility. This means that because no one can trace your transactions to a specific address, you also guarantee that coins are always interchangeable with each other. For instance, it is possible within Bitcoin to identify where certain “Bitcoins” have been, which means you can see which Bitcoins have been held by individuals or organisations associated with criminal activities.
Because the network is public and we can trace transactions, we can also trace coins.
My point is that fungibility can only be guaranteed with privacy. Otherwise, one coin might lose “perceived value” against another on the same network.
With this important and key aspect of privacy coins in mind, I will begin my analysis of Monero (XMR) and Dash (DASH) – the two biggest privacy-based cryptocurrencies at the moment.
Monero
Monero (XMR) is a secure, private, and untraceable currency system.
In essence, the Monero funds you own will not be associated with your public address like they would with Bitcoin. When you send funds to someone’s public address, what happens is that you actually send the funds to a randomly created one-time destination address. This means that the public record does not contain any mention that funds were received by the recipient’s public address.
The technology behind Monero’s confidentiality features is called ring signatures. Ring signatures enable transaction mixing to occur. Transaction mixing means that when funds are sent, the sender randomly chooses several other users’ funds to also appear in the transaction as possible sources of the funds being sent.
The cryptographic nature of ring signatures means that no one can tell which of the sources was the true source of the transaction. A system of ‘key images’ associated with each ring signature ensures that although no one can tell the true source of the funds, it can be easily detected if the sender attempts to anonymously send their funds twice.
In Monero, your public address will never appear in the public record of transactions. Instead, a ‘stealth address’ is recorded in a way that only you, the recipient, can recognise the incoming funds.
Looking at the chart above, it’s fairly easy to spot the downtrend. It started in early 2018 with the market crash and hasn’t stopped since. When we think of bear or bull markets, we should never forget that we’re mostly trading against Bitcoin. What’s the point of making huge USD gains if we lose most our entry value anyway?
At the moment, it’s probably one of the best times to make an entry as XMR seems to have bottomed around 1,000,000 satoshis. The current price is around 1,090,000 satoshis, which is about 9% higher than its low.
Still, the probability of a move to the downside is still high, even though I personally believe the bears are exhausted. The next targets I’m looking for are a move towards the 20-day EMA – above 1,117,000 satoshis – where we should expect some resistance (look at early May). After that I’d expect price to test the 1,280,000 satoshis level – the big one – which may take some time to break.
If we’re lucky, that 20-day EMA might soon become new support, which could mean XMR will finally start to push upwards.
Dash
Dash is an open source cryptocurrency and is a form of decentralised autonomous organisation (DAO) run by a subset of users called “masternodes”. Masternodes are responsible for approving and validating transactions. Dash uses a Proof-of-Stake algorithm alongside its masternodes to incentivise the network. The currency permits fast transactions that can be untraceable.
Dash was previously known as Dark Coin, a copy of Bitcoin, before it rebranded to Dash in 2015.
Dash is currently mostly used in countries like Venezuela, where people need to transact quickly with privacy and confidentiality due to strict government regulations.
The technology behind Dash’s privacy features is Tumblers, or cryptocurrency mixing. This means the cryptocurrency itself is not private, and if a masternode gets attacked, user information (addresses and transaction details) could be leaked.
Much like Monero, Dash is currently struggling to make some gains against BTC. The latest push was actually a move that surpassed both the 20-day and 50-day EMAs, even though it did not last long as traders switched back to Bitcoin to enjoy some gains. Price-wise, Dash was able to gain more than 15% in a matter of a few days, going from 1,660,000 satoshis to about 2,220,000 satoshis.
Even though a positive trend looked like it was forming in early January, we saw in April it was just smoke and mirrors as price tumbled more than 50% in just 40 days. I would argue this felt much like the Bitcoin bottom in February – which seems to have completely dissipated now.
As the bears finally return to their caves, I’m expecting Dash to follow Monero and other prominent altcoins and believe it will soon make new highs. If Dash is able to find support close to its 50-day EMA, I argue we might see Dash trading above its 200-day EMA in less than six months. For the moment, caution is advised. As long as Dash doesn’t go back to its 1,600,00 satoshis low, I believe buyers will remain in charge.
Safe trades!
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