Are All Cryptocurrencies Bad Investments? — VAULT Cryptocurrency Blockchain News #34
I recently had a long discussion with a close friend who is a financial advisor with a large traditional finance firm. He has never been interested in cryptocurrencies and considers them poor investments. Today I wanted to go over some points he raised and explain why not all cryptocurrencies are created equal.
When evaluating investment vehicles, looking for investments that generate wealth is critical. A company buys raw materials for $100 and assembles those products into a widget that they sell for $200. The result is an incremental value creation of $100. The company may lose some of this to labor and overhead costs, but it is an overall increase in value of $100.
Most of the value of stocks and cryptocurrencies is driven by market capitalization. Market capitalization is not a true measure of value. Market cap represents merely the most recent price an asset traded for, multiplied by the total shares, coins or tokens outstanding.
The danger of a market cap is that a single transaction can create billions of dollars in wealth out of thin air. We have seen this recently with Shibu Inu. When the price moves a fraction of a penny, then the market cap jumps from $13 billion to $19 billion. The investors of this coin see the balance of their portfolios jump, but to realize these profits they have to sell their coins.
Traditional crypto investors are subject to the “greater fool theory” to generate any profit. Investopedia describes this theory as:
“The greater fool theory argues that prices go up because people are able to sell overpriced securities to a “greater fool,” whether or not they are overvalued. That is, of course, until there are no greater fools left.”
So while Shibu Inu has gone from $0 to a market cap of $18.7 billion, zero dollars of wealth have been created. Lots of wealth has been transferred between people but no incremental dollars have been created.
Point Number 1: Crypto cannot create wealth because it cannot generate revenue.
My financial advisor friend insisted that Microsoft would always be superior to cryptocurrencies because, in order for a shareholder to realize the value of their shares, they are not dependent on a willing buyer. It is what makes Microsoft an investment and cryptocurrency a speculation.
Microsoft pays a dividend and that dividend grows over time. The shareholders will eventually receive the market cap of their stocks via dividends even if you discount future dividends back to present value.
Point Number 2: Investing in cryptocurrencies is investing in “the blue sky”
The idea of investment in a stock is that you are betting on a company that has some sort of plan to turn the money you invest into more money.
When people invest in cryptocurrencies, often there is no business plan to grow that money. The maximum amount of money that can come out of the machine is the amount that was put in.
Point Number 3: Cryptocurrencies are ripe for manipulation
Traditional investors argue that the lack of fundamental intrinsic value makes investing in cryptocurrencies dangerous. Institutions buy stock with the idea that companies will do well, which in turn makes them money.
For cryptocurrencies, the only rational reason for an institution to buy is because they think they can sell it to someone else for a higher price. Every institution or the rich guy who buys crypto is financially incentivized to pump their crypto.
The answer to these concerns is to find cryptocurrencies that produce their own inflation. There is a reason that the Bitcoin hash rate has reached an all-time high despite China shutting down a majority of their Bitcoin mining farms. Bitcoin generates inflation at a current rate of 4.25%. This rate is constantly decreasing and brings value to Bitcoin as it becomes more scarce. Miners who generate Bitcoin make profits but are hampered by the large overhead costs they suffer from running their mining operations.
Proof of stake coins that allow you to generate or “mine” more coins simply by holding coins are the “dividend stocks” of crypto. These coins are unique in that their investors are generating revenue.
VAULT coin and platform make it possible for people to create their own inflation by holding and generating more coins. The more coins you have on the platform, the more you generate. VAULT has a limited supply (current supply is 497,364 VAULT, and only 3 million VAULT will ever be generated) and the rate of inflation it pays out decreases every year, making it rarer and potentially more valuable.
People who understand investing and what brings an investment value will soon realize why VAULT has so many advantages over traditional cryptocurrencies.
VAULT Crypto News This Week
PAWS upgraded to v5.3.3 and the new collateral (10000), all masternodes restarted.
An updated VAULT platform userguide is available
VAULT Coin’s Market Performance This Week
We finished out the week at $5.44, which is up from last week’s price of $5.22. We had a high of $5.72 on Wednesday, and our low for the week was $5.00 on Thursday.
We saw an average of $1,549.89 traded daily. This maintains us above the $1,000 daily level and is slightly below last week’s number of $1,580.95.
The Minimum Guaranteed Price buy wall of 932 VAULT at 10,500 Satoshi was maintained on SouthXchange.
There are currently orders for 72.93 VAULT above the buy wall.
VAULT’s current price average across all exchanges is 11,121 Satoshi (0.00011121 BTC).
In addition to the platform, products, use and demand, VAULT continues to benefit greatly from being tied to and backed by Bitcoin. This week we saw a significant dip of 9.1% in the Bitcoin price.
Bitcoin (BTC) Update
Look at the news today.
Do you think we are being manipulated?
One of the greatest financial authors of all time thinks we are being manipulated financially. Bitcoin, stocks, real estate, and gold are all in danger.
We saw massive drops in the financial markets when the Omicron variant was announced. How many more variants are coming in the future?
What impact will the Evergrande default have on global financial markets?
Oh…don’t forget the Mt. Gox coin release.
The only saving grace we have is that inflation is going so high that people are fleeing from the dollar and looking for alternate stores of value.
Diversification is important for any portfolio. Things are getting crazy. Protect your wealth as best you can.
Consider investing the VAULT way and enjoy a seamless crypto experience!
Cryptocurrency News This Week
VAULT Crypto Portfolio Tracker
I wanted to give you a running tally of what you could potentially be earning with VAULT. The example I’m using holds 1,000 VAULT, with 0.1 BTC invested in the BTC% program (check it out here).
I wanted to show you what kind of returns you could be earning weekly and cumulatively.
1,000 VAULT initial investment with current value of 1,168.12 VAULT at ~23% ROI generated 5.18 VAULT blockchain rewards this week, for a total of 1,173.18 VAULT over the past 35 weeks if you compounded your daily rewards with 100% reinvest on the VAULT platform. The total dollar value earned is $942.10 at VAULT’s current price of $5.44 (0.00011121 BTC). The total Bitcoin value earned at VAULT’s current price is 0.01926 BTC.
Placing 0.1 BTC in the BTC% program earns 11% APR, providing a weekly return of 0.00021089 BTC. Over the last 35 weeks, this would be worth 0.00738 BTC with a current value of $360.
The current total value of your potential returns over the past 34 weeks would be $1,301.95 or 0.02664 BTC.
We Are Here to Help You DYOR (Do Your Own Research)
I hope this update on choosing the right crypto investment has been helpful.
Consider investing the VAULT way and enjoy a seamless crypto experience!
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This is not financial advice. VAULT Investments provides a service to its clients and is not responsible for projects listed or featured in its platform or ecosystem. The views and opinions in this update are my views alone and are not necessarily those of VAULT investments or its administration. Users should always DYOR. Invest at your own risk.
About the Author:
My Discord handle is Bobtilladhun.
I’m a long-term crypto investor. I bought my first Bitcoin in 2016 for $700. I sold 1/2 my BTC when the price doubled to satisfy my wife that I wasn’t going to lose all our money and made my initial investment back. Since that time, I have used my remaining Bitcoin stack to HODL and invest in interesting projects. I am a founding investor in VAULT and have accumulated a significant number of VAULT coins through holding my coins in CRYO and taking advantage of the compounding interest VAULT provides.
I was asked by Ian and the VAULT team to provide a weekly update on VAULT’s performance and current issues in cryptocurrency.
I hope these updates provide you with a quick overview of what is happening with VAULT and in the world of cryptocurrency.
Please contact me on Discord if you have any comments or suggestions.