Crypto And How To Deal With Its Fluctuating Value.

If you don’t want to manage large fluctuations then consider tokenized assets.

Pretty much anything you can find in the real world can be tokenized. Real Estate, IOT devices (these are things like Lime Scooters), traditional stocks and shares.

Because these tokens have a return on investment, they should have far greater stability, with the exception of tokenised assets that own other crypto assets such as shared investment funds and tokens in crypto exchanges. When the interest goes out of the market their ROI will decline along with the value.

Tokenized assets can be very similar to equities where you may also get voting rights. Users can be sent special voting tokens that have no value other than for voting. Another method would be to use a snapshot and get users to sign a message to prove their ownership of an account address, this method is less anonymous than the first method.

Other tokenized assets will not come with any rights other than some claim to revenue.

When the crypto boom happened in 2017 many tokenized asset ventures were doing their ITO’s (initial token offerings). These ventures then withdraw their capital to buy assets in the real world and after the market busted many of these ventures have ended up in the unusual situation of having a lot more capital than their market cap. The market cap is the value of all the tokens. 

Something that adds to this situation of undervalued assets is financial reporting. Unlike stocks, annual reports are not a requirement, leaving investors unsure where to find information that is current. Here is a hint, go on their communication platform, such as discord, telegram, or slack and ask other users where you might get financial information from.

While speaking of tokenized assets, there are also tokenized metals such as gold and silver backed tokens. Now to me these sound much like e-gold. E-gold was a digital currency backed by gold that started back in 1996 and ironically shut down the same year that Bitcoin started (2009). E-gold was shut down because they were not able to meet US regulation requirements. Tokenized metals are not decentralized because a 3rd party holds the metal in storage which could put them much in the same situation E-gold found themselves in.

Another method of dealing with fluctuations is by converting your cryptocurrency to something like tether. Tether fixes the amount you have to the US Dollar. The problem with this is there is currently no way to earn interest with your tether and because it’s fixed to the USD its value depreciates over time because of inflation.

Tether is good if you are going to offer an exchange service to your customers. By using tether you can quote a current market rate plus a small margin for yourself and then make the exchange in real time.

Being a crypto seller by using an instrument like tether will guarantee that you profit on each sale and you will have a profitable business. There is also an endless supply of customers for you on localbitcoins.com where you can register as a seller.

The final instrument I would like to talk about is called a smart coin like BitUSD this is a smart coin that is backed by 200% collateral in Bitshares (BTS). BitUSD can be settled, meaning that they are converted back to BTS reducing their supply and stabilizing their price. There are some arguments why these tokens should always be cheaper than the actual USD, while other arguments state they should always be more expensive than the USD. I won’t go into it here because there are entire videos already on this subject. What I will tell you is BitUSD has been around for 5 years and during that time the price has ranged from approximately $0.72 to $1.60. Which compared to other cryptocurrencies is pretty stable. Today BitUSD sits at $1.18

Which brings us to the ultimate question, do you really want a stable coin?

Bitcoin’s price 5 years ago fluctuated between $300 and $900. This year it has been fluctuating between $3400-$4200 with today’s price at $4103.

Ethereum was just having its ICO 5 years ago at a price of $0.31 per ether. This year it has been fluctuating between $108-$164 with today’s price at $142.

For now it seems long term users will benefit from fluctuating coin values, while short term users such as crypto sellers benefit from stable coins.  

Is It Too Late to Invest in Crypto?

In 2010 Bitcoin was less than 1 cent per coin.

If you had invested $5 in 2010, you would now have $2.5 million dollars.

That’s a 50 million percent return and there is no shortage of news stories sharing stories of how successful people have become by investing in Bitcoin or other cryptocurrencies.

Because of these stories, cryptocurrencies have exploded. There are approximately 290 million people in the world that hold crypto.

With a current market cap $140 billion the average person has to be holding at least $500 in crypto.

Now, if we give all the current crypto holders a 50 million percent return on their average holding of $500 we get 72.5 quadrillion dollars.

OK, so the average investor is not going to get a 50 million percent return, but what about becoming a millionaire from their average investment of $500?

Is this more reasonable?

Getting from $500 to $1 million dollars is a 200,000% return on your investment.

Is a 200,000% return on investment reasonable?

Are you really sitting there waiting for the answer? It’s $290 trillion dollars or a little more than 3 times all the money in the world.

So if you’re looking to invest a small amount, then to sit back and make it big in crypto, that ship has most definitely sailed.

You can still make it big in this space but it will require some work or you will need to consider expecting more realistic returns.

There are heaps of opportunities in the crypto space and I think if you subscribe to my channel you will get to learn more about these.  

With that said let’s look at crypto as an investment rather than how it’s portrayed as a get rich quick scheme.

Crypto Exchanges such as Kucoin offer their own token, not only do token holders receive dividends from Kucoin’s profits, but they also get discounts on trading fees for holding the token.

It is really the perfect way to build customer loyalty.

Some Cryptocurrencies offer staking where you lock in a set amount of crypto for a set amount of time. The stake gives you a percentage of transactions in the network and the ability to earn the fees from those transactions. You may still have to share some of your fees with master nodes or some of the hardware providers on the network.

Sometimes crypto organisations will do what is called a burn. A burn means that a selected number of coins are disposed of forever. If you are trading in crypto you need to be very wary of what burns will do for market prices. When Synereo burnt $100m of their cryptocurrency AMP (31st March 2018). The price floated around 28 cents (30th March) and then dropped from 31st March to lows of 25 cents and a day later on the first of April it was at a low of 21 cents.

Bitcoin has fluctuated in wild market pricing between 7500-6500 (15% margin) over these days, while also maintaining a horizontal line. While AMP had taken on a 33% loss.

So why might a coin that now has less of it available lose against a fixed supply coin such as Bitcoin?

The reason is a coins value is based off supply and demand. The burn does affect the current supply. Coins that are burnt come from the non-circulating supply that Synereo owns. Traders anticipate a price increase because of the burn announcement and this increases demand up until the burn.    

Hard forks are another type of return when users get coins in both chains. An example of this is B-Cash and Bitcoin. Hard forks occur because of a software update that is not backwards compatible. This means nodes that are not updated run the old software that sees updated nodes as having invalid transactions. Bitcoin is an open source anyone can take the project in any direction they want, for B-Cash it is a larger block size. When projects to this it is important that they use replay projection. B-Cash initially used opt-in replay protection, but now it is required for all transactions.  Without replay protection you could offer someone an above market rate for their B-Cash and then replay the transaction on the Bitcoin network taking two amounts from them. B-Cash’s replay protection works by changing the signature code on the transaction, so if the same transaction is used on the Bitcoin network it is seen to have an invalid signature.

Random airdrop tokens were popular with Bitcoin and Ethereum holders in the early days. This is where organisations would give away a percentage of their tokens in order to generate interest. Less of this is done today because the SEC now has a watchful eye now on the crypto space and legitimate organisations do not want to run into legal hassles.