The thing everyone gets wrong about Altcoins
Stories about liquidity and the Diamond in the rough
Altcoins no such thing as polarizing in the whole Cryptosphere like it.
That’s also why I see such a great future for them.
Everyone has very strong opinions on cryptocurrencies or Altcoins, why?
Cause we combine huge emotions with them. The crushed dreams and hopes of 2017, the uncertainty of their whole existence, the status of bitcoin and its dominance and so much more.
I could talk about Altcoins all day, but I want to focus on a specific aspect of them.
Their Liquidity.
What exactly is it?
Investopedia describes it as:
And here we come very closer to the main issue Intrinsic Value
“Intrinsic value is the perceived or calculated value of an asset, an investment, or a company- The term finds use in fundamental analysis to estimate the value of a company and its cash flows”
So to sum this up we have 2 major flaws when we try to evaluate Altcoins
- It is not easy to sell or buy huge amounts of them due to their lack of Liquidity.
- Since most Altcoins don’t generate revenue or have any cash flow, It is nearly impossible to define their Intrinsic Value.
But here comes the interesting thing about all of these things, all the above flaws were present in the early days of Bitcoin.
While bitcoin struggled with ALL the above issues in its early days, it went on ahead to become the most impressive investment asset the world has ever seen.
There is nothing that can compete with the price growth of Bitcoin, especially in such a short time frame.
I guess you see where I’m going with this:
The lack of Liquidity & Intrinsic Value does not mean that the asset can not be a very good investment.
It reminds me of grown-ups looking down on youth and children, forgotten how it was to be a kid or young.
Cryptocurrencies simply push the known investment knowledge to the edge, since its not only new technology, it is also an inherently closed ecosystem of worth and possibility, this all makes it very had to valuate.
So let’s look at liquidity first, what does it truly mean? And how does it affect an investment?
Following a simple example, you draft a young baseball player, someone who has potential but hasn’t won anything major yet.
If he were an asset, his liquidity would be low, cause chances that you could resell him are slim.
Let’s say you coach him, and work with him, let him grow and give him a chance, he starts to win games and offers come in, making him a valuable asset.
This is exactly what’s happening in crypto.
I would go even further when you have experience trading illiquid altcoins, you may notice how a solid but still tiny order of 1–5k$ can pump the price 10–20%
On the other hand, your coin could dump -20% but if you try to market buy it at the current price your order will with luck maybe fill 5% up.
So what does this tell us?
The Intrinsic Value is not represented in the market. Think of a diamond lying around, as long as no one knows it lies around in the dirt, there are no buyers, and the worth of it is practically 0.
But only a mad person would argue that it is so.
Exactly this is the argument of most bashing Altcoins!
No one knows your coin, no one cares and that’s why it is worth 0.
Going even further that’s why it will DIE
But it is a misunderstanding, you won’t buy the best performing asset of a decade by buying something everyone knows, uses and that’s traded with a multi-million $ volume.
I would say an illiquid gem is a perfect foundation for a life-changing gain.
A big amount of money can not enter such a project without changing its price, a 10–50x price increase would be the result.
Or as my great friend Mr.Backwards put it:
You buy the best performing asset of a decade by listening to some random guy online who calls himself Satoshi. Someone who’s building something never seen before.
Every maximalist claim he’s true to satoshis vision I strongly disagree.
We don’t know much about him, but he surely wouldn’t stop searching for the possibility of changing the world to the better.
Crypto investors have become decadent.
So how do you know if an asset has value? If it’s good? If its world-changing?
I would argue, something is either brilliant or it isn’t.
That’s the next big flaw in many investors, they follow the hype.
Many Altcoins have achieved amazing things, but since the hype is gone it suddenly isn’t worth anything?
Bitcoin didn’t always have hype, it takes time and I would say, even IF bitcoin goes 10 or 100x from here, it won’t be the best performing asset from NOW.
So stay humble, and try to phase out the buzz, the noise the drama and hype.
Our mission is to find out:
Is it brilliant?
Is it needed?
Does it work?
No one could have answered you if you should invest in Bitcoin 2010–2012.
And still, the answer is so painfully obvious, like the question if you should pick up this diamond from the dusty ground.
We learned a lot from 2017, but fear and despair is not the only thing you should take from it.
Yes be careful of scams, research hard, ask hard questions, but don’t lose your spark.
Don’t forget what brought you into crypto, and don’t lose hope.
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