Connect with us

Blockchain

How WazirX Is Dealing With the Growing Crypto Demands in India?

WazirX overtakes the Bombay Stock Exchange (BSE) & National Stock Exchange (NSE); becomes the biggest financial exchange of India… A newspaper headline somewhere in the year 2051

Published

on

WazirX, India's most trusted Bitcoin and cryptocurrency exchange

Nobody imagined that the concept of a stock exchange which was introduced on the ports of Amsterdam in the 19th century would bring about a revolution in the field of financial trading.

Something revolutionary to that extent is under the cards in the virtual currency space, and a handful of virtual currency exchanges are battling it out for supremacy.

WazirX, one such cryptocurrency exchange, is adapting quickly to capture the maximum market capitalization in the industry.

Should you sign up on WazirX right now, or there are better options available?

Can WazirX sustain the ever-increasing volumes of trade and the ever-confusing stance of the Indian government of cryptocurrencies?

Or will it get wiped out permanently?

Let’s find out!

Mano Ya Na Mano- Crypto Currencies Are Here To Stay! So are the exchanges!

April 2018 saw a huge decline in trading and holding of cryptocurrencies in India, followed by a ban imposed by the Supreme Court on all virtual currency exchanges in India. The banks and other financial entities were barred from providing services to crypto currency exchanges-  WazirX, Zebpay, Pocketbits and Koinex; to name a few.

This ban was lifted in March 2021 by the Supreme Court of India, quashing all claims of the RBI (Reserve bank of India) against crypto currencies.

And the crypto traders were back- with a vengeance!

Bitcoin and crypto exchange
Aleksi Räisä on Unsplash

Crypto enthusiasts cherished their- “I told you!” moments. And the crypto exchanges deliberately remained subdued with their- “We already knew it!” moments.

The social media was flooded with posts, tweets, and memes celebrating this comeback of the crypto coins.

And the crypto exchanges were flooded with new sign ups and huge trading volumes.

This was the beginning of the rise of WazirX.

WazirX- Rising Like The PhoeniX

WazirX- Rising Like The PhoeniX
Source

WazirX was launched in March 2018 after the humongous bull run in Bitcoin, a leading crypto currency, in December 2017.

WazirX, acquired by a leading global exchange Binance in November 2019, saw a huge rise in trading volume from March 2020 onwards after the ban on crypto exchanges was lifted in India.

The volumes on this Mumbai-based exchange rose 400% and 270% month-on-month in March 2020 and April 2020, respectively.

WazirX crossed a figure of $200 million in daily trading volume in March 2021. WazirX is now eying a daily trading volume of $1 billion as per Nischal Shetty, the founder of WazirX.

The company also claimed a monthly volume of $2.3 billion and 1.75 million users on its exchange.

As per CoinMarketCap, a leading crypto rating website, WazirX is the 27th top crypto exchange of the world. The ranking is based on traffic, liquidity, volumes and the legitimacy of the data given by WazirX.

WazirX allows trading in 137 crypto coins which is the highest amongst all other crypto exchanges in India.

BTC, ETH, DOGE, XRP, DOT are some of the top trading tokens in India which are available on WazirX.

WazirX also launched its own token WRX, which can be traded on its exchange. [Source]

WazirX- Crashing Like The UniX

Back in the 1960s, a computer operating system called Unix was developed. It could not sustain the increasing demand of advancements by the increasing number of users and was replaced by a better alternative- Windows.

WazirX- Crashing Like The UniX
Source

Just like the crashing of Unix, WazirX too is prone to getting sidelined by users if it does not match their needs of constant updates.

And there you go! WazirX too witnessed a crash; though of a temporary nature.

Its system crashed on the midnight of the 4th of April 2021 leading to an outage for a few hours.

The wallets of the users holding coins worth millions showed zero balance during this period. All the trading buy and sell signals were deactivated all of a sudden. Users were not able to monitor or place sell orders even if their coin’s price fell steeply.

The fact that this crash came shortly after WazirX crossed a volume of $200 million in daily trading; raises a few eyebrows.

WazirX is taking rapid steps towards managing the huge crypto demands of its users. Let us see how WazirX is dealing with it.

Measures To Cope Up

More Coins- More Options For Traders

WazirX is adding new crypto coins on its platform at a rapid pace. This will allow the traders to trade in the coins of their choice. Any new buzzing coin is added without any delay on WazirX so that the users don’t need to sign up for another exchange where their favorite coin is listed.

wrxcoin
Source

By giving so many options to trade, the volume of the trades is increasing on WazirX. With more volume comes more liquidity on the exchange. If there is plenty of liquidity on the exchange, the spread between the buy and sell prices of the same coin will shrink. This will be even more profitable for the traders.

The disparity in the buy and sell prices of the same coin is the prime criterion for selection of the exchange for the users. Hence, the retention of existing users and new signups will improve for WazirX.

NFTs (Non-Fungible Tokens)

NFT is a crypto asset that is one-of-its-kind i.e. it is non-fungible in nature. Its copies cannot be created after it is purchased once. Hence, it cannot be replaced by any other identical item.

To make it simple, it is not like a 100 Rupee note which is the same for all.

NFTs use the technology of blockchain just like any other crypto asset.

WazirX has launched one of India’s first marketplace for non-fungible tokens. The artists, celebrities and others with huge social media following will be approached by WazirX to launch their own NFTs. Their followers can buy the NFTs from the platform of WazirX.

These tokens will grant special privileges and access to its users. The celebrities will earn royalty from WazirX in return.

The NFT market grew by nearly 300% in 2020. The quick adoption of NFTs on its platform will help WazirX to attract more users.

According to its founder, Nischal Shetty, WazirX’s entry in the NFT space “will truly transform the market in our rapidly digitizing world with a growing interest in NFT across the globe. Both digital creators and collectors stand to benefit from the WazirX NFT marketplace.”

Policy Makers’ Intervention

The Indian Finance ministry is monitoring the crypto industry very closely. It is the duty of the exchanges and the users of crypto assets to paint a “good boy” picture in the minds of the policy makers. Any shortcomings in the eye of the policy makers must be removed by the exchange owners to maximize the probability of crypto being legalized in India.

The Blockchain and Crypto Council, a subcommittee under the Internet Mobile Association of India, has drafted a presentation note to be presented to the Finance minister and the central bank.

The presentation will include suggestions and solutions aimed at establishing the investment credentials of this asset class that faced stiff regulatory resistance in the past.

WazirX’s CEO, Nischal Shetty is taking the lead role in all such activities of the blockchain and crypto council.

Nischal Shetty, CEO of WazirX

He is also taking a stand on social media for the betterment of the crypto industry through his tweets. And taking accountability of any inconvenience caused to the users due to his platform.

Funds Raising For Growth

WazirX launched a $50 million “Blockchain for India” fund in March 2020 to invest in startups in the crypto space.

Initiatives like these will add a multi-dimensional growth prospect for the company which will improve its sustainability during the hostile situations.

Better Technology

The downtime on the 4th of April, 2021 has added worries to the technical team at WazirX. This is certainly not how they will remain at the top.

The company has learnt its lesson. It is scaling up the systems to make sure any glitch in one part of the system does not affect the other part.

When asked about the downtime, the CEO of WazirX said, “This downtime was a huge learning experience for us. As we continue to grow, we’re working on preparing our scaling systems. We’re also building systems in place to ensure that any issue in one part of a service does not affect the rest of our services. We’ll also focus on communicating with you via all online channels and keeping you abreast of what is happening in real-time”.

‘Wazir’ Of Crypto Exchanges Or Just An ‘X’ Crypto Exchange

The digital world changes rather quickly.

Zebpay and Koinex are examples of crypto platforms that had to be shut down momentarily after India’s stringent stand on cryptocurrencies in 2018. Many others fled India to find sustainability in some other country.

Many such ex-crypto-exchanges are trying to return back after the mammoth bull run in crypto coins since November 2020 and the widespread application of the NFTs.

WazirX is taking giant steps to stay at the top. It is gaining people’s confidence which is evident by its numbers.

It needs to play fair and play fast to remain the ‘wazir’.

Or even a pawn can take the throne of the king, we all know!

Also read: World’s Top 10 Bitcoin Billionaires Featured in Forbes (2021)

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Blockchain

Top Impactful Crypto Projects in 2021

Willing to start investing in crypto assets? But don’t know which ones to go for?

Published

on

Top Impactful Crypto Projects in 2021

There are thousands of crypto currencies operating as you read. And thousands of them have disappeared as well, a few before their launch and a few after.

The mining of new coins is continuing at a rapid pace too for the new coins. The year 2021 has seen a 10 times rise in most of the crypto currencies. A few of these coins have seen a rise of 100 times as well.

FOMO creeping in? Don’t worry! This is not the last that we are seeing in the crypto space. It is evolving quickly and presenting newer opportunities.

There are plenty of options to think about if you analyze fundamentally.

Let’s have a look at the top impactful crypto projects in 2021.

Parameters To Watch Out For

Tokenomics

Tokenomics stands for the economics of a token or a coin.

Just like there is microeconomics and macroeconomics that decides the characteristics of fiat currency; there is tokenomics that does the same for crypto currency.

Tokenomics of a token or coin is described in the whitepaper of the coin. Users can track it on websites like Coinmarketcap.com and coingecko.com

Tokenomics includes the study of the following:

Supply

It is the relation between the supply and demand of a currency or commodity that decides its price. Everything hovers around supply and demand in economics.

Supply and demand

Similarly, the crypto coins too depend mainly on supply, as the supply of every crypto coin is limited. Demand plays a relatively secondary role in the case of crypto coins.

The supply can be categorized as circulating supply and maximum supply:

  • The circulating supply is the number of tokens that are already in circulation
  • The maximum supply represents the maximum number of tokens a cryptocurrency will have eventually

The crypto coin owners manipulate the circulating supply with reference to its total supply according to the market dynamics.

Too much supply in the beginning leads to devaluation of the coin. A steady increase in supply ensures a higher price of the coin and gives sustainability to it.

Hence, a good supply strategy is the hallmark of a good crypto coin.

Mostly the coins start with only 10-20% of the total supply.

Market cap

The market cap (market capitalization) represents the total amount of funds invested in the crypto currency.

Market cap of crypto

The market cap can be increased by increasing the circulating supply which is totally in the hands of the owners or miners.

Hence a crypto coin will be more valuable if it has a higher market cap with less circulating supply.

Yearn.finance (a cryptocurrency) is one such example with a high market cap.

Utility

A crypto coin gathers more worth if it serves a wide range of DApps (decentralized apps).

The utility of a crypto coin increases its value. It can be used for staking, store of value, paying fees, voting, hosting NFTs and much more.

Utility is the prime factor of tokenomics.

Utility is the prime factor of tokenomics.

The best example of a crypto platform with high utility is Ethereum (ETH). ETH’s blockchain platform is used by many DApps as it serves wider applications. It is mostly used to pay the gas fee (like a service charge for using the blockchain network) along with other applications as well.

Hence, tokenomics is like a fundamental analysis of coins.

DeFi

Decentralized finance (commonly referred to as DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges and banks to offer financial instruments.

The personal loans, life and health insurances, investments in funds can be done using the blockchain technology with the help of DApps which use the concept of DeFi. The interest rates will no more depend on the government policies in the DeFi environment.

The blockchain will act as the ledger for these transactions. The smart contract between two individuals, or rather two wallet addresses of unique blocks, will decide the give and take between them.

Most of these DApps in the DeFi ecosystem use Ethereum’s blockchain technology. These platforms have to pay a gas fee to the ETH network for using its services.

These DeFi platforms also work with each other in collaboration to address an issue. For example, Stablecoin works with Aave to give a solution of a liquidity pool for loans disbursement.

DeFi has seen a tenfold rise in 2020. Over $11 billion worth of cryptocurrency was deposited in decentralized finance applications by October 2020. This figure rose to $20.5 billion till January 2021.

DeFi - decentralized finance

The widespread application of DeFi backed up by the numbers mentioned above make it the most impactful crypto project right now.

DeFi is more sustainable as compared to other projects like NFTs, Polkadot ecosystem, and BSC ecosystem.

Top Projects In DeFi

Here are the top three projects in DeFi:

1. Chainlink

There needs to be a third-party or decentralized data feed provider to feed external data into the blockchain system. These decentralized data feed providers are called oracles.

Chainlink is the leading oracle used widely by DApps for interaction with different kinds of data.

Chainlink provides a platform between real-world data and blockchain applications.

It’s token is called LINK.

Chainlink has grown immensely since 2019 and serves nearly 300 decentralized applications.

Chainlink

Synthetic, AAVE and KyberSwap are a few notable projects which use the oracle of Chainlink.

Supply
Market Cap

Its market capitalization is $13.7 billion (at the time of writing).

Utility

The LINK token has quite a few use cases, such as:

  • in smart contracts
  • fees network
  • staking

2. Synthetix

Synthetix is a fast growing DeFi platform. It uses the blockchain platform of Ethereum.

It is a decentralized asset insurance protocol. It mints tokens that are symbolic in nature to the real world assets. The value of these tokens is derived from the underlying asset they represent.

Synthetix

Its token is known as SNX.

Its price has seen a more than 25 times jump in the last 13 months.

Supply
  • Max Supply: 212,424,133 SNX
  • Circulating Supply: 114,841,533 SNX
Market Cap

Its market capitalization is $2.2 billion (at the time of writing).

Utility

The SNX token’s use cases are as follows:

  • Staking and collateralizing synthetic assets (primary use)
  • Trading Fees
  • Governance

3. PancakeSwap

PancakeSwap uses the Binance Smart Chain, unlike others using Ethereum as the blockchain provider.

PancakeSwap

It is an Automated Market Maker Decentralized Exchange which offers a marketplace for NFTs.

It allows the users to fill in liquidity by incentivizing the users, giving liquidity with trade fees.

The project received fundings from Binance as a part of the company’s DeFi acceleration program on the Binance Smart Chain (BSC).

PancakeSwap belongs to the BSC ecosystem but has widespread uses as a decentralized exchange in the DeFi space.

Its token is known as CAKE.

CAKE’s price has risen by 11582% in the last 5 months.

Supply
  • Total Supply: Not known
  • Circulating Supply: 151,652,446 CAKE
Market Cap

Its market capitalization is $3.4 billion (at the time of writing).

Utility

Its primary use is for staking. Other use cases are:

  • NFTs Auctions
  • Crowdpooling
  • Lottery applications

Survival Of The Fittest

A new crypto coin is getting introduced as you are reading. There are dozens of it in the making as well.

The tokenomics of every coin is changing quickly with time. You must be dynamically updated to spot the early mover.

Also, know the law of your land before you decide to spend your hard earned money in these crypto assets.

Chill! Take it as just one of those monotonous disclaimers after every investment ad.

Time will decide who survives.

It is the ‘survival of the fittest’ challenge for all- the crypto projects, the governments who will decide the policies, and we the people as investors.

Continue Reading

Blockchain

Ethereum London Hard Fork in July. How’s the Josh in Ethereum Users?

How’s the gas fee? “Low, sir!”- is the answer expected by Vitalik Buterin after this Ethereum hard fork

Published

on

London Hard Fork In July

Ethereum is a leading cryptocurrency. It is ranked second after Bitcoin in terms of market capitalization.

But, there is a constant war that goes on between the users and the miners of Ethereum.

What is this war about?

How huge is the users’ online battalion compared to the miners’?

What other resources do the users have to survive? Because it is the miners who have a constant supply of ammunition from their mines, not the users.

How politically strong is Vitalik Buterin, co-founder of Ethereum, to resolve the issues?

Let’s have a table view of the deployments before we start marching towards London.

Also read: Top Impactful Crypto Projects in 2021

London, via Berlin

Ethereum successfully launched the Berlin hard fork on its network on April 15, 2021.

So some work is already done.

Let’s get to the core of this London hard fork concept- which is not at all hard to understand; at least here on TBM.

How does the Ethereum Chain Work?

Ethereum runs on blockchain technology.

“That’s okay! But just using the word ‘blockchain’ everytime doesn’t answer all my questions. What is blockchain?”, one can argue.

So here is the answer.

A set of information is called a block. A group of data or a lot of information; whatever you want to call it; without bothering to be grammatically correct, is a block in the blockchain.

Why block-chain?

The blocks connect with each other to carry out the working. Hence, it is a chain of blocks.

Who creates these blocks?

“Tell me about the London fork, not the definitions of things”, is a valid argument.

But, the Ethereum London fork is all about changes in the blocks’ structure and who creates them. So lets know a few basics.

The blocks are created by computers, not humans.

These computers are set up by humans, called miners.

These computers are battling day and out to solve complex mathematical equations. Whenever a complex mathematical problem is solved, a block is created.

Who creates these blocks

This block is received by the miner, as it is his computer which has succeeded in creating it.

What are the benefits for miners?

The miner gets a benefit, or an incentive for creating the block which is called a ‘block reward’.

The users of the block- like we all, who use the blockchain for buying, selling, transferring cryptocurrencies, have to pay a certain fee for using the blockchain. This fee is called a ‘gas fee’ and it goes into the pockets of the miners as well.

Developers of applications which are run on the blockchain also have to pay a certain fee for using the blockchain. This fee, too, goes to the miners.

Gas Fee System Before The Ethereum London Fork

Currently, the users of Ethereum chain network have to place their bids for using the network.

They have to choose the speed of their transaction on the Ethereum network. The higher the speed of the transaction chosen, the higher will be the gas fee.

The users select between three options- slow, average and fast. The option ‘slow’ will attract the least gas fee which will be paid to the miners.

Depending on the congestion in the Ethereum network, the gas fee keeps on fluctuating for all the three options- slow, average and fast.

Gas Fee System Before The London Fork
Source

You can imagine the miner sitting in front of his laptop, approving transactions with the highest gas fee on priority and keeping the ones with less gas fee waiting. This is the auction system of transacting on the blockchain.

The total mining revenue surpassed $1.3billion in February 2021. 50% of this revenue came from gas fees and the rest from block reward.

If such a huge chunk of revenue is going to the miners as gas fees; it is about time that the users will demand value for their propositions as well.

And the same happened.

London Hard Fork & EIP 1559

The London hard fork proposes to implement the EIP 1559, where EIP stands for Ethereum Improvement Proposal.

EIPs were proposed by Vitalik Buterin in 2019

EIPs were proposed by Vitalik Buterin in 2019 and the proposals started from then onwards.

EIP 1559 aims at keeping an equilibrium between the gas fees and transaction speeds, thus improving the user experience.

It will make the following changes to the Ethereum network:

Block size

The capacity of a block in the Ethereum blockchain is measured in terms of maximum gas limit.

The maximum gas limit of a block in the Ethereum chain is 12.5 million currently.

EIP 1559 proposes to increase the size of the block to double the maximum gas limit to 25 million.

This will increase the transaction speed in the Ethereum network as there will be less congestion.

Base gas fee

EIP 1559 proposes to have a minimum gas fee called as the base gas fee.

The base gas fee will be less prone to volatility as it will be allowed to increase or decrease at a predetermined rate. The factors affecting the change in base fee will be well documented which will take away the role of the miners in deciding the gas fee.

The auction system of gas fees will be abolished.

If a block is already 50% occupied with information or transactions; then the base gas fee for the next block will increase. If the block is underused, or is occupied less than 50% of its capacity, then the base gas fee will be reduced for the next block.

The base gas fee will increase or decrease in installments of 12.5% only. This will keep a stability in the gas fee and keep an equilibrium between the users and the miners interests.

So, it will take 20 blocks for the gas fee to become 10 times; and 40 blocks for it to become 100 times.

The rate of inflation in gas fees is much more currently, unlike what is proposed in EIP 1559 as mentioned above.

But where will this base gas fee go? Will it go to the miners like now?

Gas fee burn

Burning is a process of destroying the crypto tokens.

The base gas fee paid by the users will be burnt i.e. it will not be available for circulation any more.

Hence, there will be no beneficiary of the base gas fee.

But why is burning a crypto asset a good thing?

Burning of a crypto token is beneficial as it reduces its circulating supply.

And we know that if the supply of anything reduces and demand increases, its price or value increases.

The ongoing increase in the price of Remedesivir injections for curing covid-19, is the best example of how the price or value of anything can inflate if the supply is reduced and demand increases.

Similarly, the burn of Ethereum gas fee will increase the value or price of Ethereum by reducing its circulating supply.

Miners’ tip

EIP 159 has provisioning for an accelerated transaction speed as well.

The users can provide a miners’ tip and increase the transaction speed for a particular transaction. This fee will go to the miners wholly.

Hence, the VIP services won’t stop completely. The needy can still accelerate the speed of their transactions and the miners can grab additional perks which they truly deserve.

The War Between Users And Miners

The London hard fork of Ethereum is not in the benefit of the miners as their revenue is being compromised.

The War Between Users And Miners
Source

Flexpool, a minority mining pool, has launched an online marketing campaign against EIP 1559. Ethermine and Sparkpool are majority miners’ pools which have joined this campaign.

Over 60% of the miners’ community is against EIP 1559 to be implemented at the London hard fork.

F2Pool is the largest pool in support of this EIP.

Chain Split

If the miners don’t come to a unanimous conclusion, there is a possibility of a chain split.

The chain split causes a split in the users and the miners, who then support either the fork or the original.

This is a vulnerable situation to be in for Ethereum.

The chain split in Bitcoin and Bitcoin Cash is one such example.

Chain splits are sometimes deliberately planned and are advantageous too.

EIP 1559- For The Good Of Digital Transactions

Ethereum is a widely used blockchain network on which many applications are built.

EIP 1559 enhances the user experience and makes it cost effective for them.

History tells, the users are the kings (grahak hi bhagwan hai).

EIP 1559 is more likely to be implemented on the Ethereum network in the London hard fork in July 2021, just like how the EIPs 2565, 2718, 2929, 2930 were made live in the Berlin hard fork in April 2021.

So, do you hold Ethereum?

And how’s your josh for this hard fork?

Well, the josh of Ethereum is getting higher and higher- Its $2138 while writing this article.

Is it low or high, right now? Let’s check.

Continue Reading

Blockchain

The Effective Way to Predict the Price of Cryptocurrencies – Tokenomics

Tokenomics- the economics of a crypto coin. Something you can explain to your 10-year-old too.

Published

on

Effective ways to predict Cryptocurrency price

Buying a cryptocurrency is in the hit list of every millennial’s weekend tasks; especially on the first weekend of the month, after a fat salary is credited.

Asking friends for a suggestion during a weekend getaway; or scrolling down on ‘crypto Facebook groups’ while sitting at home during this pandemic- is what the usual practice is.

But cryptocurrency investing is not a weekend task. It can be mastered over a few weeks, though!

If you are able to predict the price of cryptocurrencies, you can become a good investor.

Also read: World’s Top 10 Bitcoin Billionaires Featured in Forbes (2021)

Two Ways To Predict The Price

Two Ways To Predict The Price
Source: Dreamstime

The price of any currency, commodity, or a stock can be predicted using

  • Fundamental Analysis
  • Technical Analysis

Let us understand the difference between the two with the help of examples; rather than slogging our ways out through the financial jargons.

Let’s take the example of the stock of Apple.

Before buying the stock of Apple, we need to know:

  • How much has it earned in the last year or so?
  • Which new geographical locations it is planning an expansion to?
  • Is its technology developing with the need of the hour or will it face an obsolescence risk?
  • How are its competitors doing?
  • Are the raw materials for phone manufacturing becoming expensive?

This is Fundamental Analysis.

You also need to know:

  • What was its price last year before the pandemic?
  • Why does it always go down after hitting $137?
  • Is it undervalued at $120 or should I wait for $110?
  • How many shares of Apple should I buy if I have $10,000 in my trading account?
  • If it is going up after my entry, what will be the correct price to sell it to maximize profits?

This is Technical Analysis.

The study remains more or less the same for all asset classes- stocks, cryptocurrency, fiat currency and commodities.

Let us understand the important aspects of fundamental analysis of cryptocurrencies from a practical implication point of view. (We will take up technical analysis in another article. Keep following TBM)

Tokenomics

Though there is a minuscule fundamental difference between a crypto coin, a crypto currency and a crypto token; we are considering them the same for generalized understanding.

Tokenomics
Source: TechCrunch

Let us declare this space as a “No financial jargon zone”; and dive into how you can predict the price of cryptocurrencies using the fundamentals of Tokenomics- the economics of tokens.

Origin Of The Coin

Original cryptocurrency

A cryptocurrency which is developed on its own without being influenced by any other cryptocurrency is an original cryptocurrency. Example: Bitcoin

Origin of Bitcoin
Source: Freepik

Such a crypto coin has got endless possibilities as it is one-of-its-kind. This cryptocurrency brings in something new to the blockchain ecosystem.

Being a new entrant, it can be something which the blockchain ecosystem lacked; thus adding value to the users. This will see its price rocket up after launch and sustain until it faces a new challenge or competition.

But if this new entrant doesn’t add value to the ecosystem of cryptocurrencies, it will quickly lose its sheen. Such coins can get devalued very quickly.

A new coin, if backed up by a good team and marketing tactics, can help its price move up north. But if it fails to do so, the results can be devastating too.

Hence, it is important to know the fundamental technology and the need behind any crypto token to determine its possible future price.

Fork cryptocurrency

A fork cryptocurrency is formed by a change in the blockchain’s protocol of the existing cryptocurrency. Example: Bitcoin Cash (BCC)

A fork crypto token will always have the added advantage of the inherent infrastructure of the base coin. It will also have access to its followers’ community.

Hence, if the fork satisfies some need of the followers, which the base coin could not; then its price will move upwards.

Source: Hide.me

But, if the innovation of this fork coin becomes contentious; then it is likely to be disliked by the users resulting in the downfall of its price.

The price of the base coin will also be affected by the performance of the fork. It can cause a split in the followers. The base coin can also become obsolete if it is no longer needed.

These aspects need to be taken into consideration while you are predicting the price of a fork crypto coin.

Cryptocurrency built over an existing chain

There are many new crypto coins which are being minted using existing blockchain technology- like the Binance Smart Chain or the Ethereum Virtual Machine. Example: Weentar

Source: freepik

The advantage of such coins is that its developers and followers are already doing well. The new coin starts with the inherent characteristics of the smart chain. This has a direct impact on its price.

The disadvantage is that it is always compared to the other coins on the same smart chain. This attracts criticism from the community. Also, it is at the mercy of the base smart chain technology. This dependency has a direct impact on its price.

Overall, the performance of the existing chain reflects the price of the crypto coin.

Supply Of The Coin

It is the relation between the supply and demand of a currency or commodity that decides its price. Everything hovers around supply and demand in economics.

Similarly, the crypto coins too depend mainly on supply, as the supply of every crypto coin is limited. For example, there is a fixed number of Bitcoins that can ever exist, i.e. 21 million.

Demand plays a relatively secondary role with crypto coins.

supply vs demand
Source: ProProfs

The supply can be categorized as circulating supply and maximum supply:

  • The circulating supply is the number of tokens that are already in circulation
  • The maximum supply represents the maximum number of tokens a cryptocurrency will have eventually

If the circulating supply of the coin is too much within a stipulated period of time as compared to its maximum supply; the price of the coin is likely to be dragged down.

This happens because more supply of any damn thing in the world causes its prices to fall. And the reverse, otherwise.

That is why the price of something like a trip to Antarctica is more; because the supply of such travel agencies is low in the travel industry.

Hence, if the circulating supply is manipulated in such a way that it keeps a healthy demand in the cryptocurrency market, and doesn’t supply too much, the price of the coin will rise sustainably.

If a coin’s circulating supply is nearing its maximum supply, the incremental rise in price will be lesser as compared to earlier.

There are many crypto coins which are minted at its launch, but circulated slowly thereafter. Also, there are coins which are minted slowly and circulated as and when they are minted.

There are a few other ways to control supply:

Staking

Staking is an activity where a user locks his crypto coins to participate in maintaining the operations of the blockchain system. Hence, those crypto coins remain locked and are not available for circulation to others; thus reducing supply.

Coin burn

Some crypto coin owners decide to burn out a part of the user’s crypto coins as a transaction fee on the blockchain. There are many other ways of coin burn too. This reduces the existing crypto coins. Hence, the circulating supply decreases.

By having access to information about staking and coin burn, you can make an apt judgment about the future price of the coin.

Information about all the above fundamental parameters will make the prediction of the crypto coins relatively easy.

Also read: Why Is Everyone Going Mad about NFTs?

Types of Tokens

Fungible tokens

A crypto token which is identical to another similar token is a fungible token. Example: Bitcoin.

One Bitcoin with you is the same as one Bitcoin with your friend. No difference, right?

So, if such a crypto token is widely used as a mode of transaction by masses, its demand will increase. The price of such a coin will increase.

Non-fungible tokens

A token which is not identical to any other token is called a non-fungible tone (NFT).

Such a token can never be used as a mode of transaction for masses, as its value cannot be derived from any other such NFT or a fungible token.

Non-fungible tokens

NFTs are collectibles. Hence, what drives the price of such tokens is the scarcity of the underlying asset it signifies.

Its price can shoot up if someone interested in owning that collectible decides to buy it for ten times its price, lets say. Or it remains devalued forever.

You can relate it to one of those elephant tusks- valueless for many and very much valuable to a few.

Utility tokens

A token which allows access to many other applications and services on the blockchain is called a utility token.

It can be said that they have a value due to the function or property they represent.

Example: Basic Attention Token (BAT)

Such tokens rise in value as the entire ecosystem of crypto coins rises. The price depends on the other tokens it has an affiliation with.

Security tokens

Crypto tokens that share profits or invest in assets of other tokens are called security tokens. The profits generated from these investments result in the rise of price of the security token.

Since the investment part comes into picture here, these tokens are subject to taxation laws and regulations of the central bank.

Hence, its price is subject to government policies in a direct way. Its price also depends on the performance of the tokens it has invested into or is transacting with.

Learn and Earn

Earning by trading and investing in cryptocurrencies is easy if you learn fundamental and technical analysis- not a cakewalk though!

Technical analysis is always followed by fundamental analysis- tokenomics in this case.

It can be understood as if- fundamental analysis helps with the selection of the prey amongst the many in the jungle for the leopard; and technical analysis decides when to attack.

Keep learning, keep earning!

“If you are here to learn, you will earn. But if you are here to earn, you will only learn”, said a wise man about trading in the financial markets.

Continue Reading

Trending