The limits of defining the quality of tokens over the price
I have been dealing with crypto since 2014 and I have learned a lot during this time when it comes to tokens and their success. There are many thousand tokens in existence. Why do some tokens gain value? Why do others not? What indicators should I use to know which tokens to keep and which ones to sell?
In a bull market almost nothing can go wrong
When prices of crypto are going up, we get the feeling that all these different tokens are working. It seems that it's only a question of which token gets most publicity and can rise the biggest demand to define the success. Things look however totally different when markets turn south. I believe that a big bear market like we are in now is the best indicator to see whether a token is successful or not. What can be said in general is that in a bear market, a part from stablecoins, almost all tokens follow the negative trend. Maybe there are some exceptions here and there but in general, if a token is not hyped for a reason or another, the prices all go south. In my opinion this shows also that the price isn't the best indicator to evaluate a token.
How is a token surviving during the bear market?
The question should rather be whether in a bear market a token can keep it's life, it's use cases, it's community, it's development. This is crucial in order to rebound when the general market situation is going to change.
For a long time, the market cap for crypto wasn't defined by such factors but only by hype and publicity. When I was looking at the crypto influencers and their shilling of tokens, I was always wondering: what can you use this token for? If a token is only an investment asset without real use cases, then the whole market is nothing else than a ponzi scheme. You will always need more people to buy the token for it's value to go up. As long as somebody is willing to buy the token more expensive than you bought it, you will make a profit. If however nobody wants to buy anymore and people want to sell, prices can erode quite quickly and you might end up realizing that what you hold is virtually useless and therefore worthless...
Is crypto not different from Tulip Bulbs?
The first big Investment bubble occurred in the mid 1600's in Holland. There was a lot of speculation around tulip bulbs and prices skyrocketed. The market overheated and some bulbs cost as much as six times the average annual salary! Until suddenly the bubble burst and many people lost a lot of money. (source)
When I compare Tulip bulbs with tokens that lack use cases, I can't help to find some parallels. Why buy something that is virtually worthless? There are still many tokens that have no real use case. By now most of the roadmaps should have become reality but they aren't and therefore I guess that we will never see all these promises being translated into reality.
If this is the case, it's in a way not different from buying a tulip bulb with the expectation of a beautiful flower one day. But then such projects are even worse because the flower only exists in the imagination.
So should I sell my crypto?
It's important to differentiate tokens that can be used for certain purposes from others that can't. If a token fills a real need of a certain target group, then it has a legitimacy to exist. Among all the crypto that you own, which ones are useful to you? Which ones allow you to do stuff that otherwise you couldn't? Which ones are continuously developed to become better, increase their use cases and their efficiency? If you got some answers, well these are the tokens that have the biggest chances to survive and be successful in the future.
My picks
Among all the cryptos that I own, I believe that only a handful really provide services that I actually need. These are the ones that I try to accumulate. The top position takes in my opinion Hive and many of it's second layer tokens. Why? Because I use this stuff for many hours a day. I can build projects on hive that I couldn't build anywhere else and I don't even know how to code...
If you are active on Hive you realize that life is going on, people still use it. Stuff is developed. The blockchain is continuously improved. The community is maybe not growing at the moment but it survives and doesn't seem to suffer utterly. What will happen one day if people realize that among all the worthless tulip bulbs there is actually something that can do everything that all the different tulip bulb salesmen were promising?
image source: www.canva.com
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