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Cryptocurrency value - what influences it? What does market valuation depend on? What makes the price go up or down? How to make money on it?
In addition to bitcoin - about which price here we wrote in the context of whether it is ordinary a speculative bubble - there are about three thousand other cryptocurrencies. What determines their value and valuation?
The article is part of free training - Cryptocurrencies - a course for everyone!
From the point of view of the creators of the project
As you probably already know, because you know our articles about what it is token, tokenization and what is the difference between ICO and STO, releasing your own cryptocurrency is most often associated with the desire to raise capital needed for project development.
So in the first place, token is a brickthat the creators of the project sell to collect money. It is no wonder that they attach great importance to this stage of the ICO project. Then they spend the most on advertising. They pay youTubers who talk about them positively in their videos. They buy sponsored articles in industry or even mainstream portals. They go to conferences and shoot selfies with recognizable personalities. They try to make the best impression on investors, to convince them of their ideas, to get them to pay for their freshly printed tokens. Let investors see the value of the cryptocurrency they issue and associate them with hopes for profit.
After collecting often considerable funds, the team - as promised in the whitepaper - starts hard work to implement the roadmap to deliver the promised product on time....
So much theory. In practice, it happens that the team does not believe in what it invented. He does not know what to do and how to do it. He was only interested in collecting money at the ICO.
Often, the funds obtained significantly exceed the needs of the project. As a result - as is the case in an unregulated market - they are issued by team members for their private whims and wages. It often happens that the team just stall. He publicly pretends to work, but meanwhile - for a fraction of the collected funds - he buys phone applications or other smaller elements of his product from external companies, making a good impression ...
It also happens that right away team simply disappears, enjoying the easy earnings at ICO. Design he becomes dead. The value of cryptocurrencies drops to zero. Developers-scammers will soon make another ICO and will take on new investors. It is estimated that over 90% of ICO projects turned out to be a scam!
In principle, they should not be surprised if the possible value and expected profitability of the product is much lower than the sum accumulated in the ICO itself. Why work on a project when more money has fallen from the sky?
If you read the rules for the sale of ICO tokens, you will find information that having a token does not entitle you to anything. No one can guarantee that he is and he will be worth something. Thanks to this, in fact, the team can collect the cash and collapse, never entering their token on any stock exchange. You buy newly-printed tokens, not promises of project development or securing the value of cryptocurrencies in any good or service. You paid for tokens, you received tokens. Nobody cheated anyone. No one has secured the value of cryptocurrencies in any way.
Otherwise, it's up to security tokens, what we wrote in this article. However, it should be borne in mind that not every STO is the one for which it is given, and the initial value of cryptocurrencies can be significantly exaggerated and possible dividends will not cause it to be maintained.
The fate of the token on the stock exchange
However, in a more optimistic scenario, the token goes to a few better or worse cryptocurrency exchanges. The free market sets its price. Most often, larger mutual funds, "relatives and friends of the rabbit" or even the team members themselves sell their tokens on the stock exchange, realizing profits, because they bought or received their tokens well below the average ICO price for which they were bought by an ordinary individual investor. As a result, the price goes down and, if you were those ordinary individual investors, you are probably already in a loss.
What's left with you? Count on the dishonesty of the project's creator team! Yes!
The value of cryptocurrencies without speculation
If the team is fully honest and as promised, ICO will deal with the creation of the product, writing the code, implementation of the roadmap. The money from ICO will probably spend on product development, equipment payment, participation in conferences. Meanwhile, the price of the token will probably be caught, and he will be forgotten. He'll get stuck somewhere in the fifth hundred cryptocurrency ranking and hardly anyone will hear about it.
So ... You've invested in a great project of a talented team. The team has been working hard for two years and publishes great code and great products… But so what? The price is over 95% lower than the one for which you bought tokens. Maybe someday the quality of the design will stand out and become fashionable ... but what are the chances?
No one has promised youthat in any way pricing or else the value of cryptocurrency is linked to the possible success of the project.
Most often found utility tokens have forcibly imaginary use in the project. Their main task was to raise money in the ICO ... and since they are there, some use has been found for them. They are paid for something small or used in some other way. Equally well, their place can be replaced at any time by traditional cash or another token or cryptocurrency. Even if your ICO project will one day grow into a second Apple or Facebook, it is difficult to expect that the value of tokens will increase by using them in the project, as these links are too weak. Sooner, the team will spend traditional company shares, make a second ICO to recapitalize the project or to expand the range of its product, in addition to the ICO tokens it has released, it will also start accepting BTC, ETH or fiat currencies on the platform.
Most of the cryptocurrencies I know have a loose connection with the project It is difficult to expect that adoption of technology or even a global expansion of the project itself will bring an increase in the valuation of their cryptocurrencies (without pure speculation). Projects with strong, clear and calculating token valuation links with a successful project you can count on the fingers of one hand. The rest is valued almost exclusively on the basis of pure stock market speculation.
Wild speculation - fashion and (insider)trading
Therefore, we can only count on the fact that after going public, the project token that we bought in the ICO will be fashionable, that it will be noticed, that it will be talked about and written about. For that to happen, the team - regardless of work on the product or its complete absence - it has to be marketing. Take care of advertising, constant news and publicity. It still has to pay for the media, influencers, and maybe even signal groups, so that our token is interested in speculators, that bots can trade it, so that there is liquidity in the market.
Such activities are not in the interest of the project team if they focus only on the implementation of the project. Why waste your money to enter the stock market and pay for advertising when the product is not ready yet? Advertising will be needed, but the product to sell it, would be willing to use it.
However, if the team of creators is not completely honest and speculates on the price of their token, it is possible that he will do just that. In an unregulated market, cryptocurrency, creators who have the first information about a new stock exchange, partnership or other hot news, can earn money on price changesat the expense of other stock market players.
E.g. It's enough to buy cheap tokens from the market. Then we make a preview of the announcement of a super news / partnership announcement. People are winding up, buying, the price is rising. Just before the announcement date, the price is much higher than the one for which we bought. Then we sell, making profits. Finally, we announce the news.
Speculation is won by the one who has the capital that may influence price changes and / or has information that is not available to the public (eg team). No wonder that many creators are famous for the fact that they put more energy into marketing and hyping their coin/ token instead of working on the product.
However - contrary to appearances - it is such projects that are most liked by cryptocurrency investors, because they are fashionable, they are not boring. Something is happening in them all the time, they are talked about all the time and thanks to that new investors learn about them. The team seems to be active and the volatility of the price allows you to earn.
Investing in cryptocurrencies?
Unfortunately, for most crypts, it is difficult to talk about investing. By buying tokens even for the best start-up, which in a few years will become a large and profitable company, we have no guarantee of linking the value of the token with the success of the project. However, the focus of honest creators on the foundations of your project, that is, the implementation of the whitepaper and roadmap assumptions, the release of products, usually results in a significant decrease in the value of tokens, because the market likes sparkles and loud news, not great code and real value.
On the value of cryptocurrencies, in addition to the general economic situation on the market (hoss / bess), mainly the fashion for a given project combined with its strong makreting. As on the traditional stock exchange, a more recognizable brand (eg Amazon, Netflix) is more important for the valuation of an asset than the real profits and development opportunities of the company. Thus, there is speculation and a game that the market allows at the moment. Speculation assumes that the better the project, the more people want to have its tokens. For what? He counts that he will earn from holding them. Therefore, any positive information about the project may result in an increase in its valuation, as more people will want to buy its cryptocurrency, rather than sell it.
In addition, it's worth it invent hard-to-earth designs with the real application of blockchain in everyday life. Revolutionizing the electricity market (e.g. SunContract), introducing tokenization to the real estate market (e.g. Atlant) or changing the world of finance (e.g. Nexus), in which the valuation of the token is clearly linked to the financial success of the project, which in the long term - provided the project is successful - should bring profits regardless of the temporary speculation and valuation of bitcoin and the short-term economic situation on the market.
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