Asymmetric Lens: How is China Valuing Cryptocurrencies?

China’s government-backed rating system of cryptocurrencies may seem like a head-scratcher to some Western investors, but shouldn’t be overlooked.

Disclaimer: Nothing written here is financial advice nor should anyone take my thoughts as financial advisements. These are mere opinions; you should consult with your financial advisor before entering into any transaction.

Recently, the China Center for Information Industry Development (CCID) released volume 4 of what they refer to as the Global Public Chain Technology Evaluation Index. This index takes into account the core technology, applicability, and “creativity” 🤨 of 33 different cryptocurrencies they deem worthy of evaluating as seen below:

Data source: China Center of Information Industry Development (CCID)

Here are some interesting (albeit questionable) takeaways:

1. Bitcoin is ranked 10th…WTF. In case this doesn’t raise concern, consider this argument for why we need Bitcoin to be number one.
2. Steem is ranked ahead of Bitcoin…if you’ve ever actually used the platform, it’s not difficult to see why this is irrational to say the least.
3. EOS ranked 1st by a large margin…few projects have generated as much distrust in what is supposed to be a trustless technology.
4. Decred ranked 32nd…stark contrast to western optimism put forth by industry leaders such as Placeholder Capital’s Decred Invesment Thesis.
5. Komodo, a fork of Zcash, is ranked 3rd (22 places ahead of its parent). That’s either an overestimation or one kick-ass toddler.

These are just a few of the many anomalies one can point out with this index that may not show up too frequently in your local English-speaking crypto circles, subreddits, meetups, etc. But by no means should this be reason to scoff at the index for a couple of reasons:

1. Government Influence: The Chinese crackdown on cryptocurrency trading is big, very big. They have given every reason to believe that the crackdown has been effective and yet blockchain innovation seems to find its way of circumventing this crackdown. Furthermore, the very notion of ranking cryptocurrencies could suggest they aren’t trying to ban cryptocurrency at all. Instead, they look to be seeking a government-moderated crypto rollout in the best way they know how: using heavy-handed tactics to make the crypto market malleable enough to shape it the way they want. So when a government-backed index illustrates their own valuation methods, it’s probably not just for shits and giggles.
2. Industry 4.0 Powerhouse: One doesn’t need to look much further than China-based Bitmain to see how a blockchain behemoth takes shape. In such a hyped space, Bitmain simply sees their crypto mining dominance as a means to an end for their ultimate ambitions in AI/ML. If successful, many see Jihan Wu (Bitmain CEO) poised to be one of the greatest entrepreneurs of our lifetime. And if one giant wasn’t enough, Binance is arguably the fastest profitable startup to achieve unicorn status (< 6 months) despite being forced to move outside of China’s borders. While these private successes may have nothing to do with the CCID index, it’s not unreasonable to assume they have some leverage when it comes to government alignment and vice versa.

Whether this index is based in sound/universal valuation methods or simply a subjective Chinese interpretation, at the very least they test our assumptions and keep our perspectives in a nascent market fresh and flexible.

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