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Author Topic: Some observations  (Read 39 times)
OriginTrain
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February 11, 2018, 07:30:32 AM
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I've been trading crypto for nearly a year now and have made a couple of observations especially since the May crypto boom.

The main one being how investors value projects is based on irrational decision making. For example, the market capitalization of projects is not based on whatever profit the project's token may confer to the holder, but rather how popular/successful the project itself is. Some projects have coins that only serve as utility tokens, without any real profit potential, however if the project is big and successful then the market values these tokens far higher than whatever utility they will ever offer. Investors can of course profit from trading these tokens , but the inherent value of the tokens will always be limited as utility tokens despite however successful the project becomes.

Other forms of irrational investment include not valuing token worth correctly. Take Exchange A for example, which may not be so great, but pays its token holders 80% dividends of profits and reduced trading fees. Then Exchange B, which is popular, but does not give its token holders any dividends, rather only reduced trading fees. Exchange B's token has a much higher market capitalization than Exchange A simply because investors are comparing the worth of the two exchanges, rather than the worth/profit potential of their individual tokens. This trends is common everywhere. For instance in this recent crash, there are a number of coins paying dividends the same as they were before the crash. Yet the value of these tokens has dropped over 50%. This is irrational considering the dividend payments are fixed and based upon the project's real world profit potential and not the market capitalization of cryptocurrency.

This same irrationality is further observed with projects that use ICOs for fund raising. If a project raises USD from an ICO, immediately selling all crypto holdings for USD, and uses these USD to pursue a roadmap that has little to do with crypto (perhaps it has to do more with windpower, but uses the blockchain as a technology to keep everything trustless) then even though the team still has the same USD on the company balance sheets as before the market crash, the market will nevertheless penalize these projects by selling their tokens off far below the company value. Smart investors of course know which tokens these are, and buy them up for resale after the crash recovery.

Another observation: In its current form, crypto moves up and down as a whole. Days for the top 100 coins are either all red, or all green. This makes no sense considering the top 100 coins have very different objectives, some are utility tokens, some are speculative coins, and some are dividend paying tokens. The fact they move in synchronization with green and red almost uniformly shows that investors in this market are not currently mature or rational, and perhaps don't even research the utility of individual tokens, but rather just try to cash-in on the hype of a project. To them, all tokens are different shades of the same blockchain hype.

Due to the points above, this also shows crypto is still in its infancy as a trading market and has a lot of upswing potential, and brings me to the final and concluding observation I'd like to share. There are an enormous amount of doomsayers on this forum and elsewhere saying crypto has ended because there was a crash recently. If you're actually paying attention to the technology, the projects, and the proof of concepts, rather than just the day-to-day price values on a chart, you'll see that Web 3.0 is slowly emerging and when it does, it is going to be incredibly huge and world-changing, as much as Web 2.0 was compared to Web 1.0 - And when this happens, the masses will really begin to speculate and adopt crypto-tokens. It is this time that the real bubble will begin. You cannot call the current market cap a bubble. Crypto is a global market with under 1 trilllion USD in capitalization. For a world-changing Web 3.0, and the possibilities decentralized blockchains will offer, anything under 1 trillion USD is a joke. When mass adoption does occur, and Web 3.0 begins, that is when the real bubble will be created. What its top will be, and when it will burst, I do not know, but when it does burst that will just be the beginning of the mainstream adoption. Just like with the 2001 bubble when the prices crashed - that was the beginning of Web 2.0. So too when the crypto bubble is created, and then bursts, Web 3.0 will begin to mature and so too will investors as they evaluate individual tokens more correctly and research projects better.

To survive in this market, you must learn the mindset of the irrational investors that are in it currently. They look at a pretty add, invest in the ICO, join telegram and demand for exchange listings, and then roll their lucky dice hoping they'll be able to make a x10. They do not read the whitepaper. They do not care about the project. Use this to your advantage, as such senselessness won't be around forever as crypto matures and Web 3.0 emerges.
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February 11, 2018, 07:57:26 AM
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This is an interesting look at a global scale. I personally can very much agree to all you wrote above. Great observations.  And I am sure other people who watch and try to understand what's going on will also agree with you.
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