Crypto markets often function on a combination of both hype and execution. While many people would like to believe that the price of the coin represents how valuable it is, this just isn't the case.
It's fairly easy to see, given the volatility of the market, that any given day can bring a fairly large increase or decrease in price without any significant news coming out about a project, thus not really being connected to the actual value of the project. We also have many coins in the top 20 that are technically very valuable considering their price, but currently don't offer anything other than speculative value.
This is not to say that most of the coins that I am invested in actually carry much value, but rather to emphasize what actually drives the price of these coins up or down over a period of months.
While scrolling through Steemit, I encountered an article about mining Electroneum on your phone. I've pretty much ignored this project, so I was unaware what their selling point was, and my only real experience with the name was people bashing on it because their investment went down in value. I decided to check out the website, the apps, the history of the coin, etc. For those of you who have previously invested in this project, I'm sure you know the story. For those who don't, this is what I've gathered:
Like many other projects, this coin claims to be lightning fast and is getting ready for mass adoption. While nothing about their approach on the matter seemed unique, I do agree that if we want to utilize smaller transactions, we should be switching to coins that can support this, at least if the major players don't fix their scalability issues in due time. I feel like there are other projects that have taken some better steps so far in getting to mass adoption, but I won't judge a newer project for that.
However, there are a few things that struck me as unique about this project.
First of all, the ability to mine on your phone is pretty intriguing to start with. Many people have phones that have pretty similar levels of power, where mining with a CPU or GPU can vary significantly and will likely be more geared towards those who have a decent amount of capital to initially invest with. In practice, you earn a relatively low amount of coins, considering the price, for "mining" on your phone. The interesting thing about the mining process is that your phone is not actually doing any mining, but they are just giving you a hash rate based on what your phone would actually be capable of doing. If you actually used your phone's power to mine the coin, it would overheat, make your device difficult to use, and ultimately not be worth the effort. Still, for those who would be more impressed with what you can get for just having something running in the background, this could be a good option. Ultimately, I think this mining is for those with less money to work with, which is very appealing for the masses. So what might not be a great investment of time now for those with more money could end up being a good investment if you just bought the coins directly, hoping the value would go up if mass adoption did indeed develop.
The next thing that I find interesting is the supply. Most people might look at the maximum supply and be turned off, but in reality, a higher supply could be one of the most beneficial things for mass adoption, and thus an increase in price. A very smart man once told me that most of the crypto community is too obsessed with a low and finite supply. I didn't really agree with him at first, but in practice, I absolutely agree. In several situations, I've seen the price of one satoshi be too high, meaning one would have to trade against a currency other than Bitcoin to actually get an accurate valuation, and therefore, a market. While Bitcoin would have to reach 1 million dollars to have a satoshi reach one cent, I think coins with lower supplies could face a more severe problem. Also, there will undoubtedly be things that are going to cost less than one cent, and I don't see why making supplies for coins in the billions doesn't immediately fix problems like these in the future. Ultimately, I think having a supply that is 1000x that of Bitcoin just makes it easier to have micro transactions, and ultimately, lets people deal with something in units that they will actually be comfortable with if it were ever to reach mass adoption.
Finally, what is very unique about this project is the amount of people interested in the project and the amount of users that is has relative to its market cap. While this coin has lost about 90% of its value over the last few months, putting it at a pretty low valuation, the exposure of the project has still reached those people, and the ability for people to get on board with it has already been proven. Of course, offering virtually free smartphone mining will bring a lot of people in, and I've seen other projects that offer easy forms of mining or airdrops bring a lot of people in as well because ultimately, people like free shit. While this isn't very encouraging from and investment-per-user standpoint, it again shows how this project is attractive for the masses, and I think that is ultimately the selling point.
Okay, so I've talked about the positives about the project, which basically amount to the benefits of gearing themselves up for adoption from those with less money. However, we need to address the elephant in the room, which is the lack of execution.
This is the most important part, and applies to every project out there, not just Electroneum. This is something I believe people need to know if they haven't figured it out already.
Many people in crypto invest in a project because of promises. I'm not sure if they are obsessed with the "buy the rumor, sell the news" mentality, but basically, hype rules this market. If a project keeps promising things right out of the gate, it almost always allows for interest in the project and pumps in prices, even if they are short lived. If deadlines are not met, investors start to sell, and the price drops. I haven't been involved with this project specifically until very recently, but from my understanding, it's just a whole bunch of stuff that was said, and most of it hasn't materialized.
While I'm not a big fan of making promises you can't keep, an investor has to look at things from the perspective of the project. The ENTIRE world of crypto is obsessed with quick profits, and I don't blame them. Why wait years for a possible 100x when you can get a 10x every few months by following the hype? I get it. This is not meant to change your way of investing, but I don't think it is sustainable. In the meantime, I don't expect anybody to switch from a highly effective trading strategy while the hype in the market is the way it is, but again, this is not to change your mind but to instead explain why every project seems to under perform.
These projects CANNOT deliver at the rate that they claim they can. I think they know this, too. Nobody is going to want to invest in a project that is saying you can get 10x in 5 years when they know they can get a 10x with pretty much any shitcoin out there. These projects are either claiming they can get things done faster than they know they can so they can generate hype and bring in investors while the market is hot, or they actually don't know that it will take longer than they anticipated, and therefore are just feeding you their own ignorance and miscalculation.
To this day, I have yet to encounter a project that has set ambitious goals relative to what is being said by other projects and actually delivering at that rate. Many projects are delivering at a good rate, but all much slower than the common "get rich quick" investors that are involved with crypto are willing to accept.
This is not to defend Electroneum specifically, but just to say that the worst part about the project seems to be something that pretty much every project has in common: lack of anticipated execution.
Ultimately, I'm looking at its current price, and looking at everything they're doing to appeal to the masses, and it looks like a winner. I'm disregarding the execution, because I'll give them the benefit of the doubt on this, considering this is a problem that plagues nearly every project.
I also will disregard how much they raised and how many people they claim are active users because this is almost guaranteed inflated as well. And you know what? Every project does this. Most numbers, whether it's contributors or amount raised during an ICO, are almost always extremely exaggerated, so I don't consider this important either.
I really do hope one day that these projects are honest, but until then, you just have to expect that they are going to fake it until they make it to keep up with the competition. While it isn't honest, you just have to look past it if you want to make good long term picks. If you're interested in the short term, which many are, keep doing that. However, I think it's still good to be aware, just so it doesn't throw off your trading strategy if you hear some news that points in this direction.
I will likely write an article about the illusions in the world of crypto in general in the future, but for now, just know that it's there, and use it to your advantage before you let fear get the best of you. Again, always invest in solid projects that you believe in, but also have the ability to look at the bigger picture.
After all, we are in one of the biggest transfers of wealth the world has ever seen, and many projects, whether they are legit or not, will use a few tricks up their sleeve to capitalize on this movement.
Stay smart out there, guys.