Vechain has done phenomenally well in 2020-2021 with its well over 5000% gains. This poses some questions: Are you late for the party? Is Vechain a good investment in 2021?
Vechain is a good investment in 2021. According to technical analysis, the risk/reward ratio is almost nine to one (8.92:1), which is better than Bitcoin and Ethereum. The fundamentals are also solid, with good tech, a good team and many real-world use cases.
Let’s get into the what, why and how to analyze Vechain, both technically and fundamentally, as an potential investment in 2021:
Technical Analysis Of Vechain As An Investment In 2021:
To be fully transparent; I have invested in Vechain. I have actually taken some profits in the last few weeks, but still hold 50% of my bag.
I’m going to show you when I bough, and when I sold. We’ll also look at what the charts tell us about the future of Vechain, both in terms of USD, BTC and ETH.
(If you can’t read price charts, check out this article first: How to read price charts like a pro)
The green arrow you see blow is where I bought Vechain. The red arrow is where I sold about 50% of my holdings:
The price increased 2000% (21x) from where I bought, and I sold half of my Vechain, netting me a 10.5x in profits which I placed in Bitcoin. I still hold the other 50% of my initiall investment.
That’s actually a great way to trade crypto; invest in altcoins, and gradually put the profits into Bitcoin.
Let’s move on.
We’re now going to look at the VET / USD chart, and see what it tells us:
Vechain / USD
This chart shows the USD price of Vechain:
This chart can’t tells us a lot about where we are heading, but it tells us something about the risk of investing in Vecain.
The red horizontal lines you see are the different support levels in the short-mid term.
The first support level is at $0.14, the one in the middle is at $0.1 and the bottom one is at $0.06.
I really don’t see Vechain going below $0.06 in the short-mid term. However, everything is possible in the cryptocurrency market.
In other words:
The risk of investing in Vechain in the short-mid term is about 65%, as a 65% crash would put us at the support level of $0.06.
To calculate the current risk, at the time of reading this article, you can divide $0.06 by the current price. (click here to check current Vechain price)
$0.06 / current price = risk
For people looking to enter the market, I would probably wait a few weeks to let the price calm down. However, you need to check this at the time of reading, as the price will have changed since I wrote this.
Let’s move on to the VET / BTC chart:
Vechain / BTC
This chart shows the BTC price of Vechain. If this chart moves up it means that Vechain is doing better than Bitcoin. If it moves down, it means that Vechain is doing worse than Bitcoin.
The red horizontal line is a long-term resistance line we flipped into support this week – a major bullish sign.
The red arrow you see points to where we got rejected, pushing us down. This week we tested it as support, and bounced back up, pointed out by the green arrow.
If we manage to stay above this line, and have a weekly close above it, it would confirm the support level (very bullish).
If Vechain manages to hold its ground against Bitcoin, and stay above the support line for another week or two, it argues in the favour of Vechain being a good investment in 2021, at least better than Bitcoin.
Let’s look at one more chart, the VET / ETH:
Vechain / ETH
This chart shows the ETH price of Vechain. If this chart moves up it means that Vechain is doing better than Ethereum. If it moves down, it means that Vechain is doing worse than Ethereum.
This chart tells us a lot more than the other two. Let’s go through it systematically, and look at the conclusions we can draw from it:
Best possible case:
The best possible case for Vechain in 2021 is to reach the green line at the end of the year, resulting in a price of 0.000155 ETH.
To calculate the USD price, we need only multiply 0.000155 with the expected Ethereum price at the end of the year, which is $8000:
0.000155 * $8000 = $1.24
In other words, Vechain might reach $1.24 in 2021 if it reaches the top of the trend it’s currently in at the end of the year.
This is the most bullish prediction to draw from the chart, let’s look at the most bearish one:
The worst possible case:
The worst possible case for Vechain in 2021 is to fall down to the red horizontal line, reaching a price of 0.00001738 ETH.
Let’s calculate what that would be in USD:
0.0001738 * $8000 = $0.139
In other words, Vechain might clock out at $0.139 in 2021 if it falls to the bottom of the pattern it’s currently in.
Now, let’s look at a prediction somewhere in the middle of the two extremes:
The most level-headed case:
The blue channel in the middle seems to be some sort of “resting place” for the Vechain price. We often spend some time here on our way up, as well as on our way down.
If we end 2021 in this channel, the price would reach between 0.0000511 ETH and 0.00007 ETH.
Let’s calculate the USD equivalents:
0.0000511 *$8000 = $0.4
0.00007 * $8000 = $0.56
In other words, if Vechain ends the year in the blue channel, we will see a Vechain price between $0.4 and $0.56 in the end of 2021.
Conclusion of our Technical Analysis on Vechain
The best possible outcome is $1.24, and the worst is $0.139. This gives us a range we can use to calculate the risk/reward ratio to analyze Vechain as an investment in 2021.
To calculate the risk/reward ratio, what you need to do is to divide the best and worst predicted outcomes with the current price. Then divide the reward and the risk:
At the time of writing, the Vechain price is $0.18, this gives us a risk/reward ratio equal to:
Risk = $0.139 / $0.18 = 0.772
Reward: $1.24 / $0.18 = 6.88
Risk / Reward Ratio: 6.88 : 0.772 = 8.92 : 1
The potential reward of investing in Vechain is 8.92 greater than the risk. This makes Vechain an excellent investment in 2021 if it manages to perform well. However, the probability of Vechain going up or down is not specified in this analysis.
This analysis only gives us the range of possibilities. We now need to look at the fundamentals of Vechain to try and figure out the likelihood of a price-increase vs. a price decrease.
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The Fundamentals of Vechain in 2021
When analyzing an investment opportunity in the cryptocurrency market, it’s important to understand what it is, how it works, and if it has potential for future growth.
Vechain has great potential, but to understand why and how likely it is that it fulfills this potential, we have to look at the fundamentals of Vechain:
What Does Vechain do?
Vechain started in 2015, and focuses primarily on helping businesses in the logistics field. They do this through supply chain management; tracking, quality control, inventory management, and much more.
In other words, Vechain makes it easier for businesses to count their inventory, track goods all the way back to the producer, and stay on top of all the logistics.
Other traditional companies are trying to develop their own blockchain-powered products in competition with Vechain. These include giants like IBM, SAP, and BMW. However, Vechain has a clear lead as of April 2021.
Does Vechain Have a Future?
Think about it, how many “brand-focused” businesses would love to have the ability to provide proof of authenticity?
Vechain has established itself as the supply chain cryptocurrency project. This is one of the best use cases for blockchain technology in my opinion, and will definitely see huge growth in the future.
Vechain Uses Proof of Authority to Achieve Consensus
This will be kind of technical. To learn the basics of blockchain tech, read this article: What is Blockchain technology?
Let’s get into it:
To achieve consensus, and verify transactions, Vechain uses “Proof of Authority” (POA).
The most popular consensus mechanisms are proof of work (POW) and proof of stake (POS).
The drawback with these two, that POA solves, is that POW and POS lead to competition between nodes, as the nodes with more resources control the majority of the network and receive more rewards as a consequence.
Vechains unique proof of authority does not favor the nodes with more resources, but weighs them all equally.
For a node to join the network and verify transactions, it has to be authorized by the Vechain Foundation first.
This leads to a network of authorized nodes with (for the most part) good intentions, who use fewer resources – saving the environment from unnecessary harm.
For Vechain to add new blocks to the chain through POA, an algorithm chooses a random node to do it. This is why, contrary to POW and POS, more resources do NOT equal more network control. No matter how much money you throw at your node, it doesn’t increase your chances of being chosen to add new blocks.
The downsides of POA:
1) There’s no way of preventing a node from behaving badly after the algorithm picks it to add a new block.
However, there are ways of proving this in the aftermath of the bad behavior, which incentivizes nodes to behave good, but if a node actually chooses to mess things up it might be too late.
2) The fact that all nodes must be authorized by the Vechain foundation makes it “meta centralized”. The blockchain itself runs in a decentralized manner, which is of the highest importance, but the fact that you have to get authorized to run a node makes it sort of centralized on a meta-level.
This is probably no big deal, as the blockchain itself is decentralized, but it may raise concerns in the future if some of the node operators disagree with the Vechain foundation, and start threatening them with bad behavior.
This has never happened, and will probably never happen, but it’s a hypothetical possibility worth considering when analyzing Vechain as an investment opportunity.
The upsides of POA are that transactions are quick, the resources used are low, and the scalability is good.
When it comes to transactions per second, I didn’t find any hard numbers. However, I did find that the “record of number of transactions in 24 hours“.
The number of transactions per second for Vechain is unknown. The highest number in 24 hours on the mainnet of Vechain is 115 893 transactions. This amounts to roughly 80 transactions per second, showing that Vechain beats Bitcoin with a factor of at least 15-20.
It’s safe to say that Vechain has great fundamentals, and that the industry it’s in will grow in the future. This is a great sign for the value of VET, the cryptocurrency that we’re analyzing as a possible investment in 2021
Let’s take a closer look at the on-chain metrics of Vechain:
On-chain Metrics of Vechain
Below you see the number of wallets holding different amounts of Vechain. Notice that the vast majority lies in the 100 – 50 00 range.
That’s a good thing, as a well-distributed token indicates more decentralization, and prevents “dumps” by large token holders to manipulate the price.
Another interesting statistic is the number of non-negative VET addresses. The chart below shows you the growth of this metric in the last 30 days:
As you can see, the number has grown from 230K to 290K, that’s almost 30% growth in one month!
This is a sign of adoption and general hype around Vechain, which is great for the price.
Vechain has a lot of strong partnerships with big companies. This gives them an edge against the competition. Also, it’s good for business.
Below you see some of their partnerships:
These partnerships ingrain Vechain deep into the industry and give them a good reputation among other businesses, which is key to success as a blockchain tech organization.
This is, without a doubt, a good reason to be bullish on Vechain in 2021.
All things considered, Vechain has great fundamentals, and lots of room to grow. This increases the likelihood of Vechain reaching the upper parts of the range of possibilities we looked at in our technical analysis.
Vechain has great fundamentals and an attractive risk/reward ratio. All things considered I think that Vechain is a good investment in 2021. In fact I have a sizable position in it myself.
If you liked this analysis, you can check out my other analyses:
Is Algorand a Good Investment in 2021?
Is Ethereum a Good Investment?
Is Bitcoin a Good Investment in 2021?
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