Lately there has been a preference for investing in cheap crypto currencies – But are coins and tokens really so extremely cheap under one euro? How much does the investor get for his “cheap” investment?
The last weeks are strongly influenced by ups and downs of the cryptosoft currencies
Thus, quite young tokens can ascend far into the ten largest cryptosoft currencies and then fall again by 66%. One reason for this nervous market situation seems to be young investors who have a special focus on cryptosoft currencies and tokens whose unit price is significantly lower than that of a Bit coin. Currencies such as Ripple, which currently have a single-digit euro exchange rate, are already expensive, and investors seem to be interested in the crypto equivalent of Pennystock.
This thought is comprehensible on the basis of emotional arguments: Some investors feel small when they can only afford a fraction of a bit coin. Particularly with the first investment, which may be in the range of 100 euros, it can be frustrating that one cannot even buy a single coin from old currencies.
In addition, this focus on micro-currencies is fuelled by the hope of making millions with a small investment. “Bitcoin cost only one euro and rose to over 15,000! That can also happen at Ripple/Cardano/Stellar/NEM/Tron?”
At first glance, the hypothesis that cheap coins are worthwhile cannot be denied. At least in the short term, the increase in the price of a coin is anti-proportional to its price:
The average price increase of the last week is shown as a function of the price per coin or token. As a database, the data listed at coinmarketcap.com for all coins was accessed. In order to check whether this picture was only created by segmenting the amount of data, other segmentations of the amount of data were also analyzed, but all of them came to similar results.
In summary, at least for the last week, cheap coins rise more than expensive coins. However, the investor should ask himself whether these price increases are sustainable or whether the hoped-for profit of 1,000 % or more is really possible. How likely is it that a coin will experience such a price increase? In order to clarify this, it is advisable to consider cheap investment opportunities from two points of view, which are discussed in the following sections.
What kind of profit can one expect on the basis of current market capital?
The crypto currency Ripple is regarded as the basis for the considerations as to what maximum profits an investor could expect with an optimistic estimate. Is a rise to 15,000 euro at all conceivable? If one regards the network fees – up-to-date with 0,01 XRP – one would speak of transaction fees of 150 euro. Even in comparison to Bitcoin this would be absurd! To be fair, it cannot be ruled out that the fees will be adjusted accordingly. Should the XRP price rise to 15,000 euros, one would speak of a market capital of almost 600 trillion euros on the basis of the available supply. This corresponds to about fifty times the money supply of the European Union!
Crypto currencies with very specific application areas should be considered even more strictly: Is a market capital of several billion euros for each project really justified? What is more, is there really a sustainable value when this valuation is made in the pure concept phase, when only equity tokens are sold on the Ethereum blockchain?
So if you want to assess projects like Steem for their fundamental value, a comparison with the market capital of existing social networks is not wrong. Projects in the pure concept phase should also consider the long-term role of the token.