How you should view the price of crypto

forexbrokr (74)in LeoFinance • 2 years ago

Direct from the desk of Dane Williams.

With doom and gloom everywhere we look in crypto, I encourage you to think rationally about the price of crypto and what it really means.

Now within bear market conditions like we see in the market today, we wouldn’t be human if we didn’t see the value of our portfolio bleeding out and we weren’t bummed.

All over LeoFinance right now, we find posts showing that the price of crypto has an effect on people’s ability to earn a living from their stack.

Adrian is now looking for a job, while Belemo is contemplating his future because these prices mean having to work three times harder for three times less profit.

Watching price go down sucks for everyone and I’m certainly no different.

I wouldn’t be human if I didn’t take a look at the ungodly USD value of my crypto assets now and compare it to what it said barely a few months ago.

Fuck my life…

But in saying that, I’m here to offer a more rational way of looking at the price of crypto and consider what we’re actually trying to get out of our investment.

I want to live off my crypto investment

Just like the example posts I linked to above (and most likely you’re the same), the end goal for my investment is to be able to live off crypto.

Just casting my mind back I know that if I had sold my entire stack at the top, I could have lived off my crypto.

…for maybe a few years.

But what would have happened when the money I made ran out?

Back to working like a mug for someone else again?

Fuck that.

I’m here to build a sustainable income from crypto by investing in digital assets that will pay a consistent yield, so I can derive a passive income.

My end goal is to be able to keep my principle and pay myself an income from the yields generated on top.

FOR LIFE.

We all have a number.

We just have to do the math around our individual circumstances to figure out how big our base stack needs to be before we reach it.

The effect price has on that goal

Moving forward, this is where I want to encourage people in crypto to think more rationally about what the price of their assets actually means.

What is price?

Well, price is a purely speculative measurement, based on what the market THINKS the value of an asset is.

Market participants use future expectations, sometimes based on nothing more than emotion, to place bids and offers at whatever price they see fit.

Take the price of Ethereum for example, an asset which has been getting bent over and pumped this past week.

But has anything REALLY changed this week in terms of the network itself?

Nope.

I mean you can see in dalz’s latest look at the Ethereum network that all of the fundamental metrics used to determine whether the network is being used and functioning as intended, are all quite positive.

All that has changed is future sentiment based on risk-off macro conditions and blanket industry wide fear.

Not the tokenomics or underlying supply and demand for the asset.

All that matters is the sustainability of a coin’s tokenomics

As an investor looking to generate a full time income off their stack, this is the key.

All that matters in the end is whether the tokenomics of a cryptocurrency and the network it supports, are sound and secure.

That an equilibrium point between sellers dumping to make their income and buyers soaking up that supply to actually use the network, can be found.

If this equilibrium based on people using the network can be found, then a price floor will be maintained over the long term and you will always find a level where you can make a living off your stack.

Good cryptocurrencies with clear use-cases like Hive and Ethereum, obviously have demand to put this floor in place.

Heck, we’ve gone over what gives network tokens, social Hive-Engine tokens and even play to earn game tokens value on the blog before.

Now, I can hear what you’re saying.

Of course if we’re trying to make a living by selling the yield we earn on our assets, the price of crypto does matter.

My answer being that I agree, the price certainly matters...it just doesn't matter YET.

If you have sustainable tokenomics then sure, the floor price will matter in the long run.

But the price fluctuations that we see between bull and bear cycles certainly do not.

Final thoughts on how you should be looking at the price of crypto

As continues to be made abundantly clear by the extreme volatility of crypto, the market still has no idea how to fairly value these assets.

Remember, just because Ethereum is trading at 5K doesn’t mean it’s worth or will stay at 5K from a supply/demand point of view.

The equilibrium price may be somewhere completely different - Both lower or higher!

So stop worrying about prices in this way!

When it comes to making a living off your crypto stack, all that matters is that you can find a reason for a point of equilibrium to exist and thus print a floor price.

If you are able to, then you can happily let volatile prices fluctuate, knowing your investment will always maintain value.

You know there will always be buyers with a reason to step in and soak up the supply that you always need to sell.

If you can’t, then you’re better off putting your money on red at the casino.

At least you’ll get a few free vodka Red Bulls along the way.

Best of probabilities to you.