If you really want a big prize, you must take risks. Being a contrarian tends to pay off in investing unless you are trying to catch a falling knife. NEAR does not look like one as it seems a solid project well-funded and full of interesting ideas, the most important one being its focus on ease of use for both developers and end users and its BOS initiative. NEAR seems closer to oversold (RSI close to 30) compared to any of the major crypto, and its higher beta (around 1.4 vs bitcoin) makes it a great candidate for the next bullish market.
Before deciding whether NEAR is a good investment let us explain what NEAR is.
What is NEAR Protocol
NEAR is a proof-of-stake smart-contract capable blockchain that focuses on usability among developers and users. It uses sharding technology to achieve scalability and it is designed to offer high-speed transactions, low fees, and an improved user experience. Of course, $NEAR is the native token of the NEAR protocol used to pay transactions fees, staking and governance.
In summary, NEAR is designed to overcome the barriers that generally exist in the Web3 space both for developers and end users. I must concede that as a blockchain mission statement it seems like a good plan.
How to predict NEAR future prices
Being a former equity fund manager, when I see a cryptocurrency investment, I always take advantage of the traditional toolkit. At the end of the day asset prices move according to the biggest force in markets: supply and demand. Furthermore, as crypto markets mature, the behavior of investors on said markets follow the same patterns driven by some rationality and some greed and fear.
As mentioned above, prices depend on supply and demand, and the appetite for an investment that drives the latter typically is determined by fundamental factors (the rational behavior of investors), however, investors are not always rational, and that is why it is always a clever idea to monitor risk metrics such as correlation or volatility. Let us look at fundamental first
NEAR Protocol Fundamental analysis
Naturally, when looking at the future valuation of a technology there are few metrics more relevant than adoption. A recent Messari report ( State of NEAR Q1 2023) revealed that the network recorded increased network activity, with daily active accounts reaching a new all-time high during the Q1. The report reveals the token and its protocol recorded impressive financial performance in the first quarter of 2023.
In terms of monthly active accounts (MAAs), the Q1 figures fell short of their goal, at just under 1M. However, the goal for the second quarter has been set at 1.5M with a path to 10M by the end of 2023.
Although this goal seems ambitious, the NEAR Foundation has confidence in achieving it for several reasons: for one they claim to have improved their model to forecast MAA, second it seems some projects that expected huge growth on the first half of the year have push forward their goals to the second half of the year (sweat is launching its US app on September), third their social networks growth is outpacing others in the Web3 space, and last but definitely not least, the announcement of NEAR Blockchain Operating System (BOS) which we will discuss later and its new branding (with 6k accounts created right after the Denver launch).
Staking amount and validators
NEAR offers interesting staking rewards, currently yielding 9.41% APY. This in and of itself is a compelling argument to hold NEAR, since there are few top tier cryptos offering that yield.
However, when we look at staking figures it gets more interesting, since both NEAR’s total stake and validators continue to rise showing growing interest on the network and setting the stage for increased price stability, since staked crypto reduced supply creating upward pressure on the price. Current staked NEAR is at 58% of total circulating supply.
The roadmap of NEAR shows a level of alignment with each goal that its remarkable, which they clearly state in the following paragraph:
The NEAR protocol also has the ability to achieve mainstream adoption through a focus on users, rather than cultish maximalism or hype, and the understanding that converting strong Web2 projects to Web3 will get the NEAR ecosystem there.NEAR Protocol Transparency Report for Q1 2023
The BOS is a key part of their plan, and it makes a lot of sense:
The BOS makes it easier than ever for Web2 apps and communities to take advantage of Web3’s opportunities while giving developers and end users a richer, more sustainable experienceNEAR Protocol Transparency Report for Q1 2023
It aims to be a platform intended to act as a common layer for browsing and discovering Web3 products for end users, and, at the same time, allowing developers to launch faster leveraging built-ins such as profiles, payments, and notifications, among others. Importantly it is not only compatible with NEAR protocol but also all EVM chains.
Other planned improvements to facilitate mass adoption include meta-transactions, that allow a third party to pay for the transaction cost; zero-balance accounts, which remove the barrier of having to fund new accounts; or Secp256r1 keys, which allow iPhone users to have an implicit account onchain.
A flourishing Web3 ecosystem
In the past, one of the drawbacks of NEAR was its relatively sparse selection of intriguing projects, however it seems to be catching up, some example below:
- Sweat is the represent the paradigm that NEAR is looking for, it is the largest ever on-ramping of web2 users into web3
- Aurora is an Ethereum Virtual Machine (EVM) created by core developers from the NEAR protocol. It offers several advantages, including bridging capabilities with the Rainbow Bridge, high throughput, and low transaction fees in ETH.
- Spin.fi is a rapidly growing decentralized trading and investment platform built on NEAR. It is in the process of launching its own token and is aiming to bring Ethereum users to NEAR.
- NEAR Mobile is an easy-to-use non-custodial mobile wallet that brings the foundation values of the NEAR ecosystem to the mobile wallet space. Experiencing NEAR is not possible without a great and secure wallet like NEAR Mobile.
- PlayEmber is a Web3 monetization platform that links brands, studios, and gaming studios together. The PlayEmber gaming studio has amassed over 100 million downloads across various channels (mainly their web2 games).
NEAR is about simplicity, scalability, and ease of use. It uses mainstream programming languages that make it easy for developers to create dApps for the ecosystem. And the recent achievement of a new all-time high for daily active accounts along with a well-thought-out roadmap makes a compelling case for its future. Let’s move on to risk analysis to asses whether NEAR is a good investment.
NEAR Risk analysis
NEAR has twice the volatility of bitcoin, like most altcoins. This means that any investor considering NEAR as a potential investment must be sure that she can withstand insane volatilities currently around 95% annualized. One of the main problems with investment in general is that people look at charts with huge volatilities but with happy endings (otherwise they just discard the asset as an option). And whenever you see an investment with 50% volatility that has made some impressive performance (say 100%), it is difficult to place yourself at the point along the way where you would be losing 50% of your initial investment. At that moment, the vast majority of professional investors feel the urge to withdraw what is left, realizing the loss, and missing out on the rebound that you see on that chart that brought the return from -50% to +100%.
Volatility is not bad, but make sure you are willing to and capable of enduring it.
Correlation and beta against BTC
Long term correlation between NEAR and BTC is around 0.54, suggesting that it could be interesting for people invested in BTC to diversify their portfolio including NEAR. While this is true, one must be aware of the upward trend of the 1y rolling correlation between the two that is currently around 0,77. In other financial markets such as the equity market this is still considered a good diversification goal, so using NEAR along with Bitcoin is a good option.
If we use BTC as the crypto markets benchmark, NEAR 1 year rolling beta is around 1,43 (up from 0,90 at the end of 2021), this means that any movement of the crypto markets roughly translates to almost 1,5 times to the NEAR price. Consequently, NEAR could be a great instrument to take advantage of a future bull market since, presumably, it could have 1.5 times the return of BTC. That said, if we look at asymmetric beta, the negative beta for NEAR is slightly higher than the positive one, so negative movements are amplified further than positive ones.
Crypto investment philosophy
Financial markets only reward those that are willing to take risks, that does not mean that we should aim to hold the riskier assets without considering any other factors, but it does mean that if you really want a big prize, you must be willing to endure fear and do not let greed guide you.
One strategy that tends to pay off in investing and aligns well with the previous statement is being contrarian. Again, price is driven by supply and demand, and when everyone thinks that the world is ending and recommends selling demand is at its lowest and supply at its peak, this means that the price has hit rock-bottom and it can only go up, if you are able to identify this moments you will be rewarded with unimaginable returns.
Consider this when looking at NEAR’s price chart (right below), just be aware that it requires massive amounts of patience and self-control.
Is NEAR a good investment?
Investing in NEAR can have great rewards, the project has great fundamentals and a well thought out roadmap. Their goal of bringing the masses to web3 is ambitious but the strategy is aligned and achieving it would bring huge returns. The reasonably low correlation with BTC makes it interesting as a diversification instrument and its high beta makes it a great candidate for bull markets. Just be sure that you can withstand its volatility.
If you want to invest in NEAR, remember to keep your NEARs safe, use a self-custody wallet such as NEAR Mobile