Hi.

Welcome to my blog. I document my adventures in travel, style, and food. Hope you have a nice stay!

"Token X looks cheap": It really doesn't

"Token X looks cheap": It really doesn't

A commonly seen expression, particularly in dips such as this week, is for someone to say "Cryptoasset X looks cheap".

No it doesn't. 

What that person might be meaning is "X looks cheap relative to other tokens on CoinMarketCap".  However, I would argue there is not a single cryptoasset that is fundamentally 'cheap'. Not one. Why? Because none of them actually do anything that would generate enough value to cover the cost of the token. Perhaps some of the low caps where you can buy a masternode fairly cheap, but that's about it. 

But Token X is 95% off!

There is a certain appeal to buying something at 95% off its previous ATH - but that does not necessarily make it cheap. The valuations of most cryptoassets from December-January were ludicrous, over-inflated figures driven by nothing more than crazed speculation and potentially market manipulation. They were not real highs, they were mirages that in many cases were sustained for mere hours. If a previous high was not a true peak, but was rather the result of manipulation or an irrational market then it does not hold that said cryptoasset is now suddenly on sale or cheap. 

 Such bargains

Such bargains

The previous bull market acted as a rising tide, bringing all the cryptoassets up with it. Prices rises were indiscriminate; the worst cryptoassets rose just as (if not more in many cases) as the best. Whilst this trend may return, it does not follow that the same bad tokens will benefit a second time round. Many of them have been exposed for having useless developers, as scams or simply unable to protect their network because it was a pointless token in the first place that no-one wanted or needed. Hype and promotion can only work to a certain degree; at some point there has to be an end product. 

There are very few cryptoassets that can lay claim to serve any real purpose at present or that generate any value. Do not confuse that with not generating enough value to justify their current market capitalisation. Many do not generate any value. None. 

Without a value backing there is nothing left to rely on bar future growth potential, but many cryptoassets do not actually have any means of even generating value in the future. There are many that are essentially redundant tokens, created simply to do an ICO. This means that they can only appreciate in value through speculative investment. 

The above should not be taken as thinking crypto has no future or that there are no relative bargains to be found - it does and there are. But Ethereum could just as easily be $250 as it is $500. Bitcoin could realistically fall to $2k and it would not be an extraordinary price. And many of the alts...well, many of them could fall to $0 and it would not be unjustified. 

Crypto Intro: What is a Double Spend attack?

Crypto Intro: What is a Double Spend attack?

Crypto Intro: Eclipse Attack

Crypto Intro: Eclipse Attack

0