How to Explain an ICO’s Value to a Friend
Every successful coin trader should be capable of giving a quick and effective sale-pitch for each cryptocoin he owns. In most cases, that takes some efforts to run even a surface due-diligence of what a coin is and whether it may be pumped or grown in value naturally. We’re saving time for any interesting party and want to list some structural basics in the form of instructions to a potential price pumper.
The long-term demand and supply forces in the case of a typical Sweet Coin are formed by the attractiveness of the business, nothing else. This coin is the closest to a common stock it can get. It is not an application coin. It doesn’t require any conditions to exist or circulate. It is basically an equity, a form of business ownership. Despite the fact that ordinary laws are non-existent for DAOs (distributed autonomous organizations) yet, the natural laws that work on any stock market apply here just as usual.
Thus, the long term a Sweet Coin price trend is going to be the result of major value parameters such as P/E ratio that will technically be adjusted to match the actually applied dividend policies. This is a familiar [and basic] enough scenario: the better the business does, the pricier the coin becomes, that’s it. The new level of ease that DAOs offer in running a business should drive the parameters a bit up considered to a normal NASDAQ or NYSE stock. DAO eliminates internal corruption in a company. DAO reduces various types of costs. DAO streamlines some processes, especially some bureaucratic types. That all adds value of the company and makes its digital equity — a Sweet Coin — worth more.
Let us remind you again that, in the crypto-world, the typical dependence is way more complex. Consider Ethereum. The higher the coin price, the more expensive is the network for a business use, and thus the less attractive it becomes. So, it drives the price down where it should find a new equilibrium because a too cheap coin threatens the stable maintenance of the community and development. We may be wrongfully simplifying here but you should get the idea: unlike most coins on the market, a Sweet Coin is a straightforward thing that is easy to make price judgements about just by looking at the underlying business strength.
This mentioned business strength is also very easy to monitor. The major parameter is the number of real venues that use the system. The list should be publicly available and carefully maintained. Every interested person can make a random check as see whether the data is up-to-date. Of course, venues are all different in size and business-might but the overall number of supporting venues is still a best way for a quick business blood test.
Thus, whatever the coin will be valued at current number of venues, the x times more will it be when we have another thousand venues.
Another important issue is the horizon of the coin’s lasting existence. Consider a regular app coin. How long can a given coin be expected to exist? The answer is: whatever is the minimum of the following several time horizons: the management team is vital, the development team is vital, the legal entity under which development and management team has stored some essential intellectual property (not always applicable), the application itself that justifying the existence of the coin, and, finally, the applicability of the coin for the application (as we see on examples of Steemit or Ethereum, things can get really complicated). Contrasting with that, a DAO-based Sweet Coin is an absolutely stable thing that exist as long the attractiveness of the business idea exist, and — it may happen too — can well outlive that too. Thus, your Sweet Coin is going to be traded for as long as venues will need the underlying system and services.