Its a crypto-jungle out there. This post will help us valuate different currencies vs one-another and gives us a rationale on why we should consider investing in cryptocurrencies like Diamond coins (DMD), Bitcoins (BTC) and other altcoins.
Introduction
Bitcoin and the blockchain revolution is about to change the world. Someone mentioned that once you discover the potentials of cryptocurrencies and actually invest in it, "you just simply cannot shut up and stop talking about it".
There is no doubt in many experts minds that cryptocurrencies have become a new asset class. But investing generally in cryptocurrencies has become pretty hard, in some ways like buying lottery tickets if you don't have good contacts or first hand information. Using logical thinking, common sense and some economical knowledge helps us to easier navigate the crypto-jungle out there.
Investing money in supply-limited cryptocurrencies is a very good hedge against value-fluctuations of one's own national currency. Especially if you live in parts of the world where hyperinflation is reigning (Zimbabwe, Venezuela and other third world countries), or your national currency is considered small. If you- like me- live in a country with a relatively small population (like Sweden, Norway, Denmark and Iceland), it might considered clever to divert 2-5% of your investment portfolio from SEK, NOK, DKK or ISK into cryptocurrencies as a hedge against your own currency's inevitable devaluation. Why?
The value of fiat currencies (SEK, NOK, DKK, ISK, USD and EUR)
Since the abandonment of the Bretton Wood system, before which national monetary units (fiats) were pegged to gold via the US Dollar, currencies are nowadays valuated against each other and against the USD based on:
- A given currency's supply and demand, which in turn is determined by:
- The size of the economy or gross domestic product (GDP)
- The speed at which goods and services are produced, meaning tech level and worker productivity of that country and currency
- The perceived stability of said currency which is partly determined by the total savings vs loans in the bankaccounts of that nation (the amount of governmental and private debt that would burden/stimulate the economy)
- "special perks" of the fiat currency (Norway: backed by oil, Denmark: extremely export orientated, Sweden: strong industry, independent R&D, neutral country leading to unique weapons manufacturing, Germany: independent R&D, superior industrial sector, high quality to the point of over-engineering, higher worker morale, Switzerland: strong industry, neutral country, unique weapons manufacturing, superior banking sector etc)
- The rate of which the fiat is being printed by its central bank, thus devaluating the currency vs other fiats and thereby increasing inflation, reducing the value of investors capital.
- Future fluctuations of all of the above
Now what determines the value of one Bitcoin (BTC)?
- Future expectation of price increases
- total limited supply vs demand of BTC (21M in supply, 17M in circulation today)
- The degree of adoption and accessibility/availability/ease of use/cost of use of BTC to fiat conversion. BTC transaction times and costs are relatively high.
- The price-volatility of BTC vs fiat (the less the BTC price changes over time, the more attractive BTC becomes as a saving vehicle)
- Inflation control for BTC
- Method for validating and storing transactions onto its blockchain = mining. BTC uses Proof of work (POW being very eco-unfriendly and putting BTC control into centralized hands)
- Coin age and distribution via its blockchain hitherto, BTC being the first cryptocurrency and thus the oldest coin on the market.
- Bitcoin user base, community and development team. Because of BTCs position, Bitcoin core developer team performance is readily available online and will not be discussed here (volumes upon volumes have been written about this on different forums).
What determines the value of one Diamond coin (DMD)?
- Just as with BTC, all well designed crypto-coins will increase in price and be a part of the future interlinked crypto-economy.
- DMD total supply is severely limited, only 4.38M, todate 2.5M in circulation
- DMD is fast, secure, transaction costs are cheap and the wallet is intuitive and easy to use. Many new features are in store for this coin.
- All cryptocurrencies are highly volatile because of immaturity of the asset class. 20%-day-on-day fluctuations are considered normal. But because of scarcity, DMD arguably is less exposed to volatility, thus serving better as a saving platform
- DMDs inflation control is its utilization of Masternode technology and its coin rollout as we march towards 2020.
- DMD uses POS (proof of stake) to validate and store transactions onto its blockchain, its eco-friendly and anyone with a low end computer or laptop can partake
- DMD is 4 years old, an ancient coin by many standards, still standing strong and ever growing. Its coin distribution looking like those of top 20 coins on coinmarketcap.
- DMD has a knowledgeable, active and available developer team, capable of making solid long term decisions as well as rapid responses to ongoing challenges. The helpful DMD community are considered long-haul-hodlers; otherwise the cryptocurrency would have vanished long ago.
- The special perk of DMD coin lies in its design. It gives its users passive income, currently at 25% year-on-year ROI for normal DMD investors. Using the Masternode technology, DMD users enjoy A) strong network stability/availability, B) a free marketing/promotional tool and C) a substantial inflation control for the coin. This will in a synergistic manner propel DMD's price upwards. Masternode holders also gain a much higher passive income as compensation.
Bottom line:
National currencies inevitably devaluate their currencies in order to stay competitive and able to export to the US markets. This obviously reduces the value of your investments denominated in your currency. The valuation of cryptocurrencies relative to each other and to fiat currencies are somewhat different and rely on different factors. In a couple of years, this new asset class will have matured, reducing volatility, and if you have invested early and prudently, there are undoubtedly many rewards to reap. The only question is, have you picked the right coins?
Needless to say, I'm heavily invested in DMD coins so please do your research before drawing your own conclusions.
DrDMD
If you're interested, fill in https://bit.diamonds/contact.php and ask for an invite and you will receive an invitation shortly to our DMD-slack channel.