Are Cryptocurrency Markets all About who Moves First?

By: Fahad
October 17, 2020 1:39 AM UTC
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Market values for commodities and assets are difficult to determine, but the value of cryptocurrencies is perhaps significantly more difficult to determine because the market for them is still very young and industry norms and metrics have yet to even be established. Out of all the existing metrics or practices that have been used to measure why certain cryptocurrencies are worth what they are, there is one that perhaps has not seen much use and that is the first mover advantage. Being a first mover gives a huge marketing and branding incentive that plays a huge role in the value of cryptocurrencies.

As defined by economists and financial experts the first mover advantage is an advantage gained by a company that first introduces a product or service to the market. It is important to keep in mind that the first mover advantage only applies if the company actually manages to gain some traction and is able to breach the existing market, otherwise the company might not even be able to survive let alone set the stage for the first mover advantage.

For the purpose of this case study two particular platforms and cryptocurrencies will be used: Matic Network and OMG Network. The reason for specifically choosing Matic Network and OMG Network is because they are both trying to fulfil the need for a similar service in the cryptocurrency market. Both Matic Network and OMG Network are trying to provide a layer 2 solution for Ethereum. The need to provide a layer 2 solution for Ethereum is considered important, because many in the space including Vitalik Buterin, the creator of Ethereum believe a Layer 2 solution is necessary to allow Ethereum to scale and achieve greater limits. The purpose of this article is to explain the first mover advantage in the cryptocurrency market, therefore it will not be going into much detail on what layer 2 solutions are and how they work.

The Facts

Matic Network has a total market cap of $66 million USD and OMG network has a total market cap of $462 million USD. Matic Network had its token sale on 26 April, 2019, whereas  OMG Network had its token sale back in 2017.

A simple glance into Matic shows that the network is supporting several Dapps such as Blockchain Cuties, Badbit, Oxracers and several others, the whole list can be found on Matic Network. The Dapps on Matic network also seem to be getting some traction because as of current the amount of total on chain transactions that have occurred on the Matic Network stand at an impressive 668,397.668,395.

Taking a look at OMG Network to find the amount of known Dapps listed on it we find out two things: the list is not easy to find, and the list of known Dapps on the OMG network is very limited. In fact, OMG network only has one known service, Tether. The total amount of transactions generated on OMG network mainnet are also relatively far less impressive, sitting at a meager 9,040 total transactions.

First Mover Advantage

Matic Network has 35 or more Dapps and 659,357 more transactions in comparison to OMG Network, therefore a person could directly translate that as Matic getting a lot more business and consumer engagement.  Naturally we would all assume that if a certain software has more users it should be considered more valuable, however the market cap of Matic Network (66 million USD) is significantly lower than that of OMG network (462 million USD).

In regard to making the first move, OMG Network began their marketing and token sale all the way back in 2017 as opposed to Matic, which had its token sale in 2019. One of the core strengths of being a first mover is getting access to the market before anyone else, which can play a huge role in the success of any organization because it can create a strong brand as a pioneer in a very young market. Making the first move and getting exposure to the market also has the potential of giving projects a lot of free publicity through media articles and even word of mouth, because people in every industry love to talk about pioneers and first movers.

The first mover advantage also isn’t something unique to cryptocurrency, because it exists in almost every other industry on the planet. A few of the many examples of first movers in other industries include Coca cola in the beverage industry, AirBnB in the home sharing industry and Uber in the ride sharing industry. All of the aforementioned companies have competitors that are providing similar services at the same prices (sometimes cheaper) and spend a lot on marketing as well, but they are still valued at a significantly lower price by the market. One of the most popular reasons as the why all the competitors are less valued by the market is because they did not make the first move.

Final Thoughts

Perhaps there is more to the price discrepancy between Matic Network and OMG Network than just the first mover advantage. After all, In reality there are multiple factors that can decide the value of any cryptocurrency, and the first mover advantage is just one of those many factors. Nevertheless, I hope this case study gave everyone a good insight into the first mover advantage and what effects it can have in the cryptocurrency market.

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