Three factors that affect the value of a token
A good product, which solves real problems, already attracts the attention of many investors. A product with a strong team and high-quality tokenomics ensures a strong market position and serious demand potential in the future. Studying the project’s fundamental analysis, any investor first asks himself a question: “What is the real use of this product? What problem does it solve? Will you need it in the future?” If there are no answers to these questions, then the project is most likely not worth your time or investment.
A quality project shows a full description of tokenomics and gives detailed answers to these questions:
- What is the token made for?
- How does the token achieve its purpose?
- How actively is the token used?
- How is the token distributed?
Its majesty, Hype
One should not underestimate the extent to which hype and marketing strategies influence the popularity of a project. We will just give one example. And most likely, His Majesty Hype, has already made that name familiar to you. The Dogecoin project became the second highest yielding currency just a week after its launch. The hype around Dogecoin was started by members of the Reddit community, who quickly found a use for it and began using it as a donation. Users transferred dogecoins to one another in gratitude for interesting information, sharing ideas and useful content. As a result, the digital currency instantly exploded on Reddit, creating a market value of $8 million at the time. Dogecoin gained fame for charity: almost $30,000 of this cryptocurrency was collected on Reddit to send the Jamaican bobsled team to the Winter Olympics. Also Doge4Water raised $32,000 to supply clean water in Kenya.
This project came from nothing and had no value, but assess the scale of the impact of the hype. What if the same type of hype became centered around a project which solved a real world problems?
Cryptocurrency market cycles
Market cycles drive both traditional and cryptocurrency. When analyzing the value of a token and its prospects, you should consider which part of the cycle the market is currently in at the time of research. The standard market cycle for the crypto market is Bitcoin’s rise, which ends with the main cryptocurrency stabilizing at certain levels. Then money flows into altcoins, Bitcoin’s dominance index falls, and the altseason begins. Historical market data should also be analyzed. This can be useful for predicting future trend changes, but it is worth remembering that no market cycle is an exact copy of the previous ones. Each of them are different in some way. Each uptrend gives a different increase, each correction has a different scale.