Crypto prices. Legitimate market forces or supply/demand hocus-pocus?

Crypto prices. Legitimate market forces or supply/demand hocus-pocus?

I am sure that somewhere in your journey through the myriad of Crypto exchanges you have come to ask:  What exactly drives or determines the pricing of the Coins that are so readily traded every day?  

The critics say that the factors driving supply and demand in the Crypto world is largely superficial and that is nothing more than guesswork as to which way the market will move next.

The counter argument is that the supply and demand, willing buyer willing seller, free exchanges are allowed to function as an open market price determination mechanism that values coins based on what investors are willing to pay.

That is fair enough.  But what then are the underlying factors that determines the demand (and thus the price) of a Coin on any given point in time other than popularity, hype, FOMO, rumour, propaganda, luck, hope, fear or, dare I say, magic? 

In the more traditional world of investment banking and stock exchanges, the same principles are at play that determines your stock price and company valuation.  The price is at the meeting point of buyers and sellers where a shareholder is willing to move his shares on to the next guy in line at the agreed price offered and asked by both parties. The buyers and sellers may have differing motivations behind their decision to buy and sell but the process is a fair one and the price is automatically determined by the exchanges based on the simple concept of supply and demand.

Now in this world of brick and mortar corporations there are solid underlying economic principles that can be applied and assessed to determine the current value as well as future potential value of a stock. These are measurable, real world factors such as foreign exchange rates, commodity prices, inflation, interest rates, market conditions and international relations.  

Research can be done before one acquires stocks into the company history, its management, the market factors at play in their specific industry as well as potential changes that may affect the viability and profitability of the company in future and these may determine the level of positive or negative sentiment that affects the price today.  The companies deliver profits through delivering real-world goods and services and their value reflects their ability to do so efficiently. 

In addition to the above, there is also tangible value in a company based on its assets that can be liquidated if the poo hits the fan. 

So where then are these tangibles in the Crypto world?  

Do I stock up on Bitcoin today because everyone says the price will run again in December?  It will run again this December because it ran last December.  Surely? Maybe? Really??? 

Is there any way to identify and apply some degree of logic, knowledge and research to make more informed, more measured and more profitable decisions around Crypto?

Certainly.  And the answer is simpler than you might think.  

It involves a bit of research and some degree of effort but, as with most things in life, your outcomes will be determined by the amount of effort you are willing to invest in your buying decisions.

Basically, every Coin has a story.  A reason for existing in the first place, a goal of sorts.  The basic appeal of Cryptos being anonymity and cross-border agility applies to all Coins by default.  

But in addition to this, some Coins aim to answer a specific question, provide a solution for an existing problem and fill a gap that exists in the market.  

Bitcoin for instance have seen more and more outlets accepting it as an alternative currency with even some car dealerships accepting Bitcoin as tender for some flash cars to much publicized fanfare.  Microsoft, Subway, PayPal, Shopify and Expedia are amongst the better known companies that will take your Bitcoin, Ethereum, Dash, Monero etc in exchange for their wares. 

As handy as this may sound, you can quite easily trade your Bitcoin for a brand new Lambo at the Newport Beach Lamborghini dealership in California, but then your BTC means diddly-squat on the streets of Nairobi Kenya if you’re looking to buy a loaf of bread and some smokes on your way home from work...

So what does this all mean for price determination then? 

How does the practical use factors behind a Coin translate to gains for your portfolio?

Simple.

Most market analysts predict that the biggest gainers in the next year will be the Coins that find their way into the hands of millions by opening doors for them and empowering them to do things for their users that was impossible up to know. 

In very simple terms, become useful to the masses and rich rewards awaits. 

Many have tried to be just that.  The Crypto for the masses, the currency that transcends borders and cultures and have no limitations.  Most have failed, sadly. 

Ultimately what use is a Bitcoin that can be sent in a flash from Kathmandu to Timbuktu with not a vendor in sight? Many have fallen at this specific hurdle and have failed to find the final piece of the Crypto puzzle.  

Recently I have been observing the developments around Tigereum (https://www.tigereum.io, TIG $ 0.0662 +153.61%, 30 days 5/10/2018, coinranking.com) with keen interest.  They have a simple plan to deal with this final hurdle of ease of use.  They have recently progressed from concept to beta test to implementation of a unique concept that can split the Crypto race wide open. 

They are backing up the tech related to Cryptos with a physical network of agents and local partners around the globe.  This network will facilitate the quick and painless exchange of TIG for cash in local currency that immediately addresses the problem of acceptability of tender and allows for this to literally happen anywhere on earth.  

Our unfortunate laborer in Nairobi can now quickly swap TIG for Shilling and buy those smokes or convert the Shilling earned for the day into TIG and send it to his parents in Johannesburg to swop for Rands on the streets Soweto and buy what is needed.  Instantly. Anywhere. 

From what I have seen and heard the rollouts have been seamless so far and the development teams have delivered on their promises with more to come.  The first transactions have already taken place and is ready for roll-out on a large scale.

So in closing again how does this translate to growth for investors and speculators, not necessarily in need of the functionality this Coin offers but just looking for a good investment. 

Quite simply by being useful. Being useful creates demand. Demand brings growth. 

The kicker is that this demand will also be constant and steady and growth therefore will be the same. 

So Abracadabra and Voila, you have real-life driving factors of growth for a Coin in a Crypto world of smoke and mirrors and hocus-pocus...

All it takes to use this knowledge to your investment advantage is a little research.  Ask critical questions of the Coins you are looking to invest in.  Do they have a broader use plan, is this practical and implementable in the short term? Where are they in the process of moving from concept to roll-out and who are the people behind the development.

Whoever ticks these boxes are a very solid bet at this stage and the Tigereum team have been ticking boxes left right and centre in the last three months.  Their solid gains in last month bears testament to that.

Not a bad one to keep an eye on. 

CC

The next big thing?  It’s here, but the bus is almost full! 

The next big thing?  It’s here, but the bus is almost full! 

Cryptocurrency.  The race to relevance through practical applications for the real world.

Cryptocurrency. The race to relevance through practical applications for the real world.