The number of crypto coins and tokens available to convert your hard earned assets into have exploded in the past three (3) years. Creating a token has never been easier and the explosion of M2 (money supply) thanks to the Federal Reserve and US Government created a giant bubble in the crypto space that has only just begun to burst. Fortunes were made and a whole lot of money was lost. What are the key things an Anarchist Investor should be looking at when watching or investing in a crypto coin/token?
1. What Is Its’ Use Case
Every token typically comes with a white paper outlining its creation, how new coins are minted (if at all), how coins will be burned (basically removed from the system), what blockchain it’s used on, etc.. And every token is usually associated directly or indirectly (layer 1 vs layer 2) with a specific blockchain. You can think of the blockchain as the foundation on which an ecosystem of applications or functional offerings will be created.
THIS IS THE MOST IMPORTANT PART OF YOUR ANALYSIS:
What is the f’ing thing used for? How are holders of the coin/token using it to transact, trade, generate business, etc.? If you can’t answer this first questions easily, it’s time to move on. Don’t waste your time. It’s more than likely to be a pump and dump or Ponzi scheme. Shit coins typically have no real use case and only have value based on attracting more suckers that are willing to pay a higher amount for each coin than the last set of suckers that bought them. Ever see Boiler Room? Yeah, it’s exactly like that.
2. How Liquid Is It?
How do you get access to it and how easy is it to exchange it for something else. Liquidity is important for Crypto because it’s digital and supposedly designed for peer-to-peer transactions with little waiting. Now just because a coin isn’t as liquid as cash doesn’t mean you should automatically throw it out with the bath water. But you need to know why it is less liquid. One of my favorite is HIVE and it’s less liquid than most crypto’s but there is a reason and I’ll share it at the end.
3. Is It Backed By Anything?
A number of crypto’s have come out backed by absolutely nothing but hopes and dreams. They typically go to 0 on a long enough timeline.
Some are backed by the activity on the blockchain. Many of these are exchange tokens such as Binance (BNB) and KuCoin. Keep in mind that the health of the coin/token is directly related to the health of the exchange as a business. If the business goes down, so does the coin/token. Others like this are attached to ecosystems that have ongoing development and their value is derived from the volume of business that is conducted on the associated platform/blockchain.
Some have come out with pegged coins to the US Dollar with varying success and part of that had to do with using too much leverage (borrowing) and not being able to hold the peg when the market went south (Terra-Luna and USDT had this issue).
Some are even professing to be backed by precious metals like gold and silver. Make certain you’re kicking the tires on how the metals are stored, audited, and if the coin can be readily exchanged for those metals. Big red flag if the answer to that last one is a no!
4. What Is Its’ Track Record
Does it have a history? How long has it been around? Are there any stories on the crypto forums about difficulty with transactions, exchanges, burn rates, fees, etc. The crypto community is very close nit and there is a lot of gossip so you do need to parse the dialogue filtering out trash talking. Crypto folks can get religiously attached to one coin or blockchain which can make their analysis one-sided.
What Crypto’s am I Currently Paying Attention to?
1. Bitcoin
It’s the grand daddy of them all. Bitcoin to me is like the gold of the crypto world. The amount of coins will soon be maxed out and then the question become how does it react versus changes in the currency markets throughout the world. The deflationary aspect of Bitcoin makes it very attractive as an asset that will maintain or grow its’ value over time. It is fairly liquid and easy to access or move out of. Its’ backing has a lot to do with the ecosystem of other coins/tokens that are built off of it or use Bitcoin as a reserve to support their value.
2. Ethereum
Yes, the transaction fees are ridiculously high still. But the ecosystem is built on a blockchain that is currently the foundation for NFT’s (non-fungible tokens) which I think will be a very popular method of validating the ownership of digital assets in the future. The mania in 2020-2022 saw a lot of junk get ridiculous valuations because it was new. Over time the true value of NFT’s will become more apparent when it comes to digital contracts and larger transactions that happen on the blockchain (think physical and digital real estate sales).
3. Bitcoin Cash
The main reason why I track this is purely as a transactional coin. Bitcoin cash has less of the burdensome issues that Bitcoin and Ethereum do when it comes to pure transactions. Lower transaction fees and often faster speeds. If Bitcoin and Ethereum are the Gold and Silver in your bank vault, Bitcoin Cash is what I would convert them to so I could have some ‘walking around money’ around town.
4. Pirate Chain (ARRR) and Monero (XMR)
These are privacy coins. The chief reason why these are important is a higher level of encryption that can keep transactions more anonymous. As an Anarchist Investor you need to be wary of all of the systems that are converging to remove privacy from the world of finance and everyday transactions. Artificial Intelligence (AI), Central Bank Digital Currencies (CBDCs), Biometric tracking, and Smart ID’s are all going to create a world without any anonymity. ARRR and XMR are a means to rebalance that shift.
5. HIVE
This is a specialized one. The HIVE blockchain is a platform that started as a way to monetize social media. Your posts draw people to social media platforms, why should wall street types get paid for that when you don’t? Enter HIVE. A blockchain that is currently one of the most decentralized and censorship-resistant. And the user is more in control so there isn’t the algorithm indoctrination mind worm issues that exist on conventional social media platforms. The HIVE blockchain is growing. It is less liquid of a coin but for good reason. If you buy HIVE, you’re investing in the community. No pumps and dumps here. The stakeholders are all the users and they want new users to try it out and become committed to supporting the ecosystem. Plus they’re just awesome people from around the world! There is also a number of level two tokens on HIVE that are well worth a look.
I’ll be posting some specific crypto updates in the near future so I’m looking forward to digging deeper into each one of these, especially when I begin to build the subscriber-only portfolio.
How to Get Involved
The main newsletter will be free to all. Follow here on HIVE or sub on substack at anarchistinvestor.substack.com. In the coming months, I will begin building a paid offering that will provide a ‘model portfolio’.
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***Keep in mind that investment and investment results are very much based on you as an individual. Do not rely solely on the discussion here to inform your investment decisions. Always make the investment decisions that are right for you.