Hello mates, I decided to write about it because we have so many newbies in the cryptosphere who haven’t ever made a trade and are just here for the quick buck. If you are one of thoses, between you and me… this is for you.
Baby steps: what’s the market about.
Market is sell/buy on its most simple way, but gets complicated on the prices each hodlr sets which can be really variant; and the projections into the wholesome projects there are in the space.
Crypto markets are not exempt to scammy behavior, on the contrary, so many ICO’s have scammed people just because of inside/washed trading where they buy all and pump price with no real assets or development to back promises in the long term.
Crypto Market is not about fuzz or ideas, even though people can make a quick buck with it, is about value. Any project must have value to be valuable, not just mere speculation and price pumps on exchanges.
Investors must see that existing as a project is not a reason to be valuable, or supply/demand price pump isn’t value either. Projects must have value at the moment or in the future with use case or intrinsic value for interest of the buyer.
To explain it better, let’s see what made bitcoin valuable.
Was the first to introduce Blockchain on the mainstream, * that’s number one* ; plus the big need of usage because with all the advantages it gave, just the same year centralization had brought down economy and started a crisis over the world, that summed up to a scarce and unique supply that would be gradually given to those who worked for it confirming transactions, on a certain period of time.
Gained value for the mining, thats number two; after the algorithm got a bit more complex and more complex equipment was need it to mine the Bitcoin people whom were earning it by mining needed a ROI (Return Of Investment), and also benefit, that’s one of the reasons why the coin piked in 2016~17.
Small supply huge usage, that’s number three, bitcoin has a peculiarity there’s gonna be only 20 millions of it ever; that created such a FOMO earlier. Plus in early 2011 Bitcoin started to be used as a mean of payment, (at darknet exchange, mostly) so the scarcity summed up to the demand for people who wanted it, made the currency itself to gain more value over trades.
As the usage grew on more legit places demand increased, hence the value was increasing as well.
Speculation and fear of missing out (FOMO), that’s number four, there’s no doubt that Bitcoin itself, just as in right now, is only considered digital gold, speculation and market cap are the main reason of its value at the moment, there’s no actual use case for bitcoin technology as it is because of its core complexity and scalability. Hence the value it holds is based on the commodity itself not as a currency (Will explain that later). People who bought high, will not sell low, hence if you need it now… you need to buy high. That’s that in simple words.
The question is, what makes new projects valuable.
There is no variable that could be taken as a reference for “what makes assets valuable”. There are many factors to be taken into account when giving value to an asset, nevertheless indicators and some points can determine how can an asset be or become valuable on the long term.
Let me show you some, specifically on cryptocurrency projects (BlockChain technology).
(1) Scarcity,
Depending on how many tokens (coins) will be created into the ecosystem, might or might not determine the value on the long term of a project. Why? Because depending on adoption, use case and volume is the price increase on the long run. For example if there’s 1 trillion coins that will only use half million people and no more (because of the target niche and intrinsic use case), it means that is unlikely to increase over $1 USD, because there will be no demand on the long term. Plain and simple.
(2) Veracity,
Never FOMO. Real investors never FOMO. We research, we see, we evaluate, we do not FOMO. The veracity and completion of projects is a core topic to offer value on a given asset, you need to see those way before acquiring it, way before putting your money where your mouth is, research on the project itself, how it came to life, how will they use the technology, what’s their overall plan, what have the team done before. There has to be veracity on every aspect.
(3)use case,
Nothing that will ever be used can have value on the long term. Every project you put money into must have use case or planification for it. If not, is like buying stocks on a shell company that does nothing, takes your money, but will never make it grow, hence the stocks will fall in the long term and your money will be lost; in cryptospace, your coins (tokens) will lose value and you’ll get rekt holding them.
(4) Opportunity,
Market launch and opportunity are crucial for a project, why? because a project can be better than its predecessor but if there’s already adoption with the same technology and this new project you want to invest promises to take down its competition, look closer.
Opportunity and launch might determine gain in short/long term. Main human problem is changing habits, hence if for example Ethereum already exists but many others promise to tear it down, it will take time; no matter if others might offer better platform, have better development and a bigger team, they are late to the party and will take time for humans to proceed on adoption and understanding to change platforms to the project you plan to invest in.
Opportunity on new projects is crucial to have gain and returns, obviously after you have done your homework.
Conclusion
There are no perfect project and no zero risk investment, therefore only invest what you are willing to lose. Do so with your head out of your butt, and not following the crowd, most of the time they are wrong. Do your homework.
Do your own research on every project you will put money on, never FOMO nor only trust “the team” of a project, many of them just want you to jump in with your money so they can fund easily their no use case project and disappear leaving you with loss.
And please, please, P L E A S E; ask question before spreading FUD on any project, sometimes they seem fishy but are legit and vice versa. Not every project is legit, but not every scammy look project is not; bitcoin was considered a fraud at first and… you know the story now.
Thank you for reading, don’t be shy… check all my entries and follow for crypto-economics and educational reading. New posts every week.
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