MONERO [XMR] REPORT - Scaling New Heights in Blockchain Performance: 2025 Portfolio / Part Two

Part Two / Page 11

‍

Thus, Monero’s main competitive threats are less from other projects and more from external forces (regulation, technological paradigm shifts). If privacy itself becomes a central feature of more financial systems (for instance, hypothetically if central bank digital currencies allowed some privacy or if every major wallet integrated seamless CoinJoins), Monero’s unique selling point diminishes. However, current signs point the opposite way – increasing surveillance pushes privacy-seekers into Monero’s arms.

From an investment perspective, one must ask: if not Monero, what else provides similar functionality? The answer today is: virtually nothing at Monero’s scale and trust level. This semi-monopolistic hold on the privacy coin niche can be seen as a strength – albeit a strength in a constrained market segment.

Additional Sources – Competitors:

• “Monero vs Zcash vs Dash: A Comprehensive Comparison” – Guarda.com (compares default privacy, speed, etc.).
  
  
• Chainalysis webinar or blog on privacy coins usage – highlights dominance of Monero vs others in illicit use.
  
  
• Zcash block explorer stats on % of shielded transactions.
  
  
• OKX and Binance delisting notices referencing multiple privacy coins (Monero, ZEC, DASH).
  
  
• Litecoin MWEB adoption data (Google for any analysis on how many LTC use it – likely very low).
  
  
• Crypto market share chart of privacy coins over time (perhaps from Blockworks or CoinMetrics).
  
  
• Developer blogs: e.g., Electric Coin Co.’s blog on why optional privacy (Zcash) is different from Monero – possibly acknowledging trade-offs.
  
  
• Academic: “A Comparative Analysis of Cryptocurrency Privacy Techniques” – might exist, evaluating Monero’s ringCT vs Zcash’s zk-SNARK vs others, concluding Monero’s advantage in default on-chain volume.
  
  
• TRM Labs or Elliptic reports on privacy coin risks – often mention Monero and Zcash as main ones.
  
  
• Community reactions: e.g., a Reddit thread from r/Monero where users compare Monero to Zcash and point out why they stick with Monero (citing default privacy, distrust of Zcash’s founding reward, etc.).
  
  
• Developer commentary: Monero Research Lab members have occasionally weighed in on Zcash (friendly rivalry). A quote from e.g. Sarang Noether or Justin Ehrenhofer on differences could be insightful.
  
  

With all preceding analysis in place, we can now integrate these insights into a coherent final investment recommendation.

Investment Recommendation

Thesis

Monero (XMR) represents a unique asset in the cryptocurrency landscape: a digital cash for the privacy-focused era. Our investment thesis is that Monero’s unparalleled privacy technology and fungibility offer a durable value proposition in an age of increasing financial surveillance. XMR can serve as a hedge against the erosion of financial privacy, much like gold is a hedge against fiat debasement or Bitcoin against capital controls. Monero has demonstrated resilience and steady adoption over its 9-year history, suggesting that demand for private, censorship-resistant money is persistent. With ongoing protocol upgrades (e.g., Seraphis) poised to strengthen its privacy advantage, Monero is positioned to maintain its dominance in the privacy coin niche and potentially capture a larger share of global transactional use-cases that require confidentiality.

We view Monero as a speculative but compelling addition to a diversified portfolio – a play on the thesis that privacy will command a premium in the future digital economy. It is not a mainstream asset and carries elevated risks (discussed below), but for investors with a multi-year horizon and tolerance for volatility, Monero offers asymmetric upside. If global trends continue toward surveillance and control, demand for Monero’s “digital cash” utility could surge, driving significant value appreciation. Conversely, if privacy coins are legally marginalized worldwide, Monero could stagnate or decline. This binary outcome profile, in our view, favors a moderate allocation (1-2% of portfolio) as a high-risk hedge with independent drivers.

Strengths

• Best-in-Class Privacy Technology: Monero is widely regarded as the gold standard for cryptocurrency privacy. Its use of ring signatures, stealth addresses, and confidential amounts ensures every transaction is private by default. Monero achieves true fungibility – one XMR is indistinguishable from another – a property even Bitcoin lacks. Continuous improvements (Bulletproofs, CLSAG) have kept Monero’s privacy a step ahead of competitors and analytical attacks. This technological moat makes Monero the go-to choice for users needing anonymity.
  
  
• Active Development & Innovation: Monero’s open-source development community is among the largest in crypto, with ~86 monthly contributors and a proven track record of delivering upgrades. Upcoming innovations like Seraphis/Jamtis (next-gen protocol for larger anonymity sets) and Bulletproofs++ will further enhance privacy and efficiency. The project has successfully executed ~2 upgrades per year, showing agile governance and technical excellence. This assures investors that Monero will remain technologically relevant and resilient.
  
  
• Loyal User Base and Grassroots Support: Monero has cultivated a strong, ideologically driven community (3rd largest developer community after Bitcoin and Ethereum) that is committed to its success. Hundreds of volunteers, researchers, and donors actively support Monero’s ecosystem via the Community Crowdfunding System. This decentralization of human capital means Monero isn’t dependent on any one founder or company – a strength for long-term sustainability. Community-driven marketing (MoneroKon conferences, merchant adoption drives, etc.) keeps organic growth on track.
  
  
• Proven Real-World Utility: Unlike many crypto projects that thrive on speculation alone, Monero has demonstrable real-world usage:
  
  
  
  • It facilitates ~20,000+ transactions daily, indicating meaningful activity (private remittances, commerce, etc.).
    
    
  • Over 1,000 merchants accept XMR for payment (from VPNs to retailers), valuing the financial privacy it provides.
    
    
  • It’s extensively used in peer-to-peer transfers and in regions with capital restrictions as a way to move money invisibly.
    
    
  • Even in illicit spheres, Monero has become instrumental (e.g., dominating darknet market payments by 2021) – while that carries reputational risk, it validates Monero’s core utility (untraceability). The bottom line: Monero has real demand for its intended use-case – private, censorship-resistant transactions.
    
    
• Resilience to Adversity: Monero has weathered multiple bear markets, exchange delistings, and even an IRS bounty on cracking it, yet continues to thrive. Its price, while volatile, has shown relative strength during crypto downturns (XMR was one of the few assets up YTD in early 2025 amidst a market slump). This resilience suggests an underlying strength – a consistent base of users who value Monero regardless of market hype. The network’s hashrate (security) and usage have held steady or grown even as regulation tightened, underscoring robust decentralization and persistence of its value proposition.
  
  
• Tailored Tokenomics for Sustainability: Monero’s tail emission ensures miners remain incentivized, thereby securing the network indefinitely (What Is Monero & How Does It Work? Who Created XMR?). While some see infinite supply as a negative, the low inflation (~0.8% annually) actually contributes to network health by funding security without significantly diluting value. Importantly, no insiders or founders directly benefit from emissions (no premine, no dev tax) – all XMR is earned via mining or purchased on the open market, aligning miner incentives with network and investor interests. Monero’s economic model has proven effective: mining distribution is decentralized (no ASIC-farms dominating), fees are low, and the network remains secure.
  
  
• First-Mover and Network Effect in Privacy Niche: Monero has a multi-year lead in establishing itself as the privacy coin of choice. Competing projects like Zcash and Dash have not gained comparable traction or community trust (Empire Newsletter: Privacy coins sacrificed so crypto could run - Blockworks). Monero’s name is almost synonymous with “private cryptocurrency.” This mindshare gives it pricing power within its niche – any uptick in privacy demand tends to accrue to XMR first. The network effect (more users -> more privacy -> more users) continues to reinforce Monero’s moat.
  
  

Weaknesses & Risks

• Regulatory and Legal Risks: Regulatory hostility is the foremost risk to Monero. Authorities worldwide (EU, US, Asia) are cracking down on privacy coins:
  
  
  
  • The EU’s MiCA/AMLR framework will effectively bar regulated entities from touching Monero. Exchanges in Europe, the UK, Australia, and more have delisted XMR. The U.S. hasn’t banned Monero, but exchanges avoid listing it due to FinCEN/OFAC pressures. Future regulations could escalate (e.g., outright possession bans or severe penalties for using privacy coins, though none enacted yet). This environment limits Monero’s upside by curbing access and could significantly impair value if it worsens. An extreme scenario would be major countries criminalizing Monero transactions, which would shrink the user base to a shadow network and crash liquidity.
    
    
  • Additionally, Monero’s association with illicit use (ransomware, darknet markets) draws negative attention. For instance, the U.S. DOJ and IRS have explicitly targeted Monero for forensic research. Any success in tracing Monero (should it occur via breakthrough) would instantly undercut its core value proposition.
    
    
  • Legal risk to holders: Currently holding XMR is legal in most jurisdictions, but investors should acknowledge the regulatory uncertainty. Compliance-minded institutions already shy away, and that is unlikely to change soon.
    
    
• Limited Liquidity and Access: Monero’s exchange liquidity is relatively low. Delistings from high-volume venues (Kraken EU, Binance in some regions) mean XMR trading is concentrated on a few platforms and P2P networks. This manifests in:
  
  
  
  • Wider bid-ask spreads and slippage for large trades. Exiting a substantial position could move the market.
    
    
  • Fewer fiat on-ramps: new users often face a multi-step process to acquire XMR (buy BTC or USDT, then swap to XMR), which deters casual adoption and institutional buys.
    
    
  • Dependence on smaller exchanges which carry higher counterparty risk (security and solvency of these platforms may not be as robust). Overall, liquidity risk is high – which contributes to volatility and could hamper price discovery. In a crisis, Monero could see exaggerated price swings if liquidity dries up further.
    
    
• Volatility and Risk Profile: Monero’s price is extremely volatile, more so than many large-cap cryptos. 60-day price swings of ±30% are not uncommon. Its Sharpe ratio (risk-adjusted return) is lower than Bitcoin’s on multi-year horizons (BTC’s 4-year Sharpe ~0.97 vs Monero’s est. ~0.5-0.7). Max drawdowns have exceeded 90% in the past, and future downturns could be similarly severe. For an investor, this means:
  
  
  
  • Holding XMR requires strong stomach and long-term conviction; short-term or leveraged positions carry significant peril.
    
    
  • There is no yield or dividend to cushion volatility (no staking or interest, since Monero is PoW).
    
    
  • It may take a long time to recover from deep drawdowns if one buys at a cyclical peak (Monero took ~3.5 years to reclaim its 2017 high, versus Bitcoin’s ~3 years). In portfolio context, Monero can be a volatility drag if sized improperly.
    
    
• Perception and Brand Challenges: Monero’s branding as the privacy/darknet coin is a double-edged sword. While it attracts privacy loyalists, it also repels some users/investors who fear associating with a “shadowy” asset. This stigma can limit broader adoption. Many businesses are reluctant to openly accept Monero due to compliance optics. Even some otherwise pro-crypto figures distance themselves from Monero to avoid reputational risk. In contrast to, say, Bitcoin (increasingly seen as an institutional asset class), Monero is far from that level of legitimacy. This perception gap may persist or widen if illicit use cases dominate headlines, thereby capping mainstream appeal.
  
  
• Scaling and Usability Constraints: Monero’s strong privacy comes with trade-offs in performance:
  
  
  
  • The blockchain is large (~170GB) and growing due to privacy data. Running a node or wallet (initial sync) can be resource-intensive, potentially hindering decentralization if it worsens (though pruning and ongoing optimizations help).
    
    
  • Transaction throughput is modest (4-8 TPS under normal conditions). While the network dynamically adjusts block size, Monero is not designed for high-frequency microtransactions at global scale. If usage grew 10x, it might face throughput or storage challenges, requiring further protocol upgrades.
    
    
  • Some user-experience friction: managing long alphanumeric addresses, waiting ~20 minutes for 10 confirmations for high assurance, etc., means Monero isn’t as seamless as, say, using a credit card or even some crypto payment apps. The need for users to upgrade software during hard forks (typically annually) is another mild friction. These aren’t critical flaws – Monero works well for current demand – but they are limitations to keep in mind if considering widespread adoption scenarios.
    
    
• No Institutional Sponsorship: By design, Monero has no foundation or large corporate backers championing its adoption. This means:
  
  
  
  • No formal partnerships with payment processors, fintech companies, or governments (unlikely anyway given privacy focus). Monero won’t be integrated into PayPal or major exchanges anytime soon.
    
    
  • Fewer lobbying resources – unlike Bitcoin (backed by the Bitcoin Advocacy Project, etc.) or even Zcash (Electric Coin Co. engages regulators), Monero relies on grassroots advocacy. This could put Monero at a disadvantage in policy influence.
    
    
  • Institutional investors (funds, ETFs) almost universally avoid Monero. Hence, Monero misses out on capital flows that have benefited assets like BTC and ETH. As an investor, you likely won’t see Monero in a Grayscale trust or a Fidelity crypto index, which can dampen demand.
    
    
• Margin of Error in Privacy: While Monero is currently regarded as untraceable, it’s not theoretically infallible. If a vulnerability were discovered that compromised Monero’s privacy or allowed coin inflation, it would be catastrophic for its value. Monero’s history shows quick patching of issues and rigorous audits ( Bulletproofs | Moneropedia | Monero - secure, private, untraceable ), but the risk is non-zero in such a complex protocol. Moreover, user operational security matters: if users mishandle view keys or use weak settings, they could undermine their privacy. These nuances mean Monero’s privacy, though powerful, is not idiot-proof. A well-publicized tracing of a Monero transaction (even due to user error) could dent confidence.

‍

Thank you for taking the time to read this article. We invite you to explore more content on our blog for additional insights and information.

https://www.thestandard.io/blog  

‍

"If you have any comments, questions, or suggestions, please do not hesitate to reach out to us at [ https://discord.gg/K72hed6FRE ]. We appreciate your feedback and look forward to hearing from you."

‍

CLICK HERE TO CONTINUE

PART Two / PAGE 12: www.thestandard.io/blog/monero-xmr-report---scaling-new-heights-in-blockchain-performance-2025-portfolio-part-two-12