One of the best-performing assets in the entire cryptocurrency market since the beginning of 2023 is the native asset of the Render Network (RNDR-USD).

The coin is now up 1,600% over the last 14 months and 275% since I covered it for Seeking Alpha last May. RNDR is actually bucking the trends in many of the other alt coins at this point as it continues to rally to new highs even as other notable altcoin runners peaked in December. What’s driving this? At least in part, AI exuberance. In this update, we’ll look at network metrics and some key risks to consider before chasing the token near $8 per coin.

Recap of the Basics

Here’s a quick summary on Render Network if RNDR is not a coin you’re familiar with:

Render Network is a distributed system of GPUs that allows graphic artists and creators to render out their creations through a more cloud-based system rather than on a local computer system. This kind of hardware is generally expensive, and the network allows creators who either don’t want or can’t afford the hardware the ability to transact with idle compute. RNDR is used within the network as the payment coin for jobs. It also doubles as the governance token of the network.

Key Metrics and Network Usage

Since RNDR functions as a utility token, active addresses using the coin could be a decent starting point for assessing network usage. Here we see a notable grind higher over the last several months:

The 30-day active addresses engaging with RNDR oscillated between 10-15k in February 2022. This year, those figures have generally moved between 20-25k – a notable increase in RNDR active addresses. The question then is are these addresses engaging with RNDR for utility on the network or is this purely speculative behavior? Fortunately, the Render Network is fairly transparent with quarterly data, and we can get a decent sense of how the network usage has grown over the last year.

	2022	2023	Change
Frames Rendered	8,778,780	9,972,981	13.6%
RNDR Used	1,850,887	2,701,381	46.0%
Jobs Created	159,786	179,949	12.6%
Scenes Uploaded	158,611	174,658	10.1%
Coin Closing Price	$0.40	$4.47	1,017.5%

Source: Render Network, Trading View

Some key metrics the Render Network highlights are Frames Rendered, RNDR used, Jobs Created, and Scenes Uploaded. I think this is really useful in context because it shows network usage is essentially up between 10-14% from 2022. RNDR usage growth at 46% year over year is likely indicative of an increase in the total cost of the jobs and the Render Network seems to allude to that in a recent Medium post detailing the metrics:

The significantly accelerated growth of RNDR used compared to the growth rate in the number of frames rendered reflects the rise of larger and more complex rendering work being uploaded to the network – led by projection mapping for the Las Vegas Sphere and immersive rendering projects for spatial computing devices like the Vision Pro.

Even if it’s true that better quality rendering jobs are being facilitated through Render Network, it’s difficult for me to imagine how a 46% YoY rise in token usage justifies a 1,000% increase in token price. You could argue RNDR was simply undervalued a year ago, but that’s typically not the case with crypto tokens in my experience.

Surely, there is something else happening that is driving these gains. Of course, the Render Network utilizes distributed GPUs and nothing is hotter right now than GPUs and the companies that sell them. From a recent Render Network blog post:

The largest application of Generative AI – text to image / video / 3D – leverages core technologies pioneered in 3D graphics like raytracing, which are core components of current GPU rendering workflows on the network. This is to say that the expansion of the Render Network into AI compute workloads is not a pivot, but rather reflects the growing convergence between AI and 3D graphics within GPU compute.

Frankly, this is a savvy move. Whether Render Network has the job growth to back it up or not, highlighting the relationship between GPU systems and AI is a great way to further the awareness of RNDR as an asset.

And it would seem investors and whales, who together make up more than 80% of the RNDR in existence, benefit if the price of the token increases on expectations. To be clear, I’m not making any insinuation of nefariousness here, just pointing out what I think is a fairly obvious motivation to help token holders.

Other Concerns To Consider

When something rallies over 1,300% in a little over a year, one has to at least consider the possibility that the rally is reaching a point of exhaustion and entertain taking profit. My approach to many of these high-flying cryptos has been to take out the principal when something doubles and ride with the rest. However, I occasionally do sell out of winners entirely. While I do still have a small level of exposure to RNDR, I have sold this rally.

Here’s key risk number one:

The chart above shows in the money RNDR holders. The figure is currently at 97% of holders in the money – what this means is just 3% of RNDR holders are behind or flat. While this doesn’t mean RNDR can’t keep running from here, it does generally serve well as a warning sign for future returns when in the money holders get to this level.

We saw a big drawdown in early 2021 when in the money holders hit 89%. We saw an even bigger drawdown in late 2021 when the metric hit 93%. More recently, an additional 93% in the money print back in December resulted in a 36% decline by mid-January. The coin has more than doubled in price in the month since.

Here’s key risk number two:

This isn’t meant to disparage all crypto-focused YouTubers as a few of them actually do very good work. However, most of this material is nothing more than the equivalent of catnip for gamblers. And RNDR has become one of the darlings of the YouTube “finfluencers.” It’s not difficult to find thumbnails and “technical analysis” that shows three or even four-figure price targets for the RNDR token. This type of behavior generally rings alarm bells and harkens back to the STEPN Mercury Protocol USD (GMT-USD) saga from 2022.

Summary

There’s nothing wrong with making speculative bets in disruptive industries and asset classes. I actually called RNDR a “Top Token Idea” back when I was running the BlockChain Reaction investor group through Seeking Alpha specifically because I thought the network could fill a legitimate need for cloud-based rendering. To be clear, I still hold some RNDR to this day. Part of my process during the management of the BCR investor group was avoiding the trendy tokens that all the YouTubers were pumping. We’re clearly at that point with RNDR, and I’d argue that the level of actual usage of the network doesn’t justify the enormous rally in the token’s price. I’m downgrading RNDR from “buy” to “hold.” Remember, investors don’t usually go broke taking profit.