Investment: Asset manager, financier and professor of cryptocurrency Alexander Alexandrovich Ryabinin claims that the attractiveness of investing in digital assets can be determined by analyzing inflationary and deflationary processes.
The expert shared his method with the publishers of BeInCrypto. If you’re not a math head, this might melt your brain. But try to hang on.
Investment in cryptocurrency
This study shows how the attractiveness of a cryptocurrency can be calculated, through inflationary and deflationary processes.
For this, a coefficient has been developed. It is necessary to substitute all the data of the project in order to obtain the most valid value.
A – current token supply
C – current token supply
D – staking
E – trading volumes within the platform subject to commission
Perfectly reflects this Biswap idea:
We took the current capitalization of 220,490,000
Added additional issue estimated at 10%
60,000,000 – volume of tokens per day
Below 35%, you can bet
0.5% of transactions are burned
In the case of BSV, there are also deflationary measures that can be factored into the formula
Sometimes the bet offer is too small to count or not at all. Then we use the formula, removing the staking.
An example is LRC:
10% – apy
70% – fee for all trades for srakers
10% – burn
0.5% – buying and selling fees
1,374,513,896 – circulating supply
240,000,000 – trading volume per day
1,200,000 – fee per day
840,000 – fee for staker per day, 25,200,000 per mouth, 302,400,000 per year
120,000 – burns per day, 3,600,000 per mouth, 72,000,000 per year
1,374,513,896/72,000,000 = 19
You can substitute different data. The main thing to observe is that the inflationary factors are in the first part of the coefficient and the deflationary factors in the second.
Thus, we obtain a coefficient which reflects the advantage of deflation over inflation. After analyzing the sector (each asset), we can get the average ratio. And as a result, to understand what assets stand out from the sector.
For example, after analyzing the TOP 100 centralized exchange sector, it became clear that the average value is 20.
Here are the prices for the projects:
We can conclude that attractive coins for investment will be OKB and FTT, as their ratios are below average. LEO is not an attractive investment. The rest is neutral.
Short term vs long term
This does not mean that these projects will benefit in the short term. On the contrary, these coins will quickly give a small profit. So, LEO coin is growing faster than others at this time. But if you deal with it for a long period of time, it will lose to investments with a lower coefficient.
This is because this coefficient shows how quickly the coin supply will decrease. Deflation largely reflects supply constraints. But it should be noted that you cannot rely solely on this coefficient. Since it only reflects growth/reduction in supply. The demand factor must also be taken into account.
The previous coefficient reflects the internal economy of the project. How will the coin supply reflect in a year, for example.
Now we have to consider the external demand for the coin itself. After all, by combining these 2 indicators, one can understand the attractiveness of the project for investors and future profitability (at least through a reduction in supply – in a year there are 10% less coins, demand is good, which means that at least 10% growth can be predicted fundamentally).
So how do we calculate the second coefficient:
A – current market supply
B – trade volume
For example, let’s analyze the BSW volume per day:
220,490,000/60,000,000 = 3.5
We do the same with other parts.
2,579,588/4,535,631 = 0.5
25,000,000,000/161,474,917 = 1548
330.668.061/92.843.985 = 3.5
Based on the analysis, we can conclude that the most interesting coins for investors are GNO, BSW and RUNE.
Let us now analyze centralized exchanges.
163,276,974/1,030,589,981 = 0.6
953.954.130/7.004.759 = 130
135,473,350/62,725,740 = 2
98,379,860/4,197,593 = 22
154.409.022/24.103.685 = 7
60,000,000/9,630,463 = 6
Here we already have 2 leaders FTT and BNB, 2 good indicators of HB and OKB, the rest are underdogs.
As a result, we had 2 good ideas. FTT is weak in both ratios and OKB with excellent deflation and strong demand.
You can add a coefficient to summarize the results:
A – supply coefficient
B – demand factor
So we get:
BNB-20*0.5 = 10
OKB – 15*6 = 90
Due to high demand, BNB wins. But it should be noted that the demand is floating, today there is, but not tomorrow. In other words, in the short term, this calculation takes place. But in the long term, things can change.
As an example of historical confirmation, we can take the 2021 cycle and CAKE with its excellent deflationary measures. From February to high.
CAKE has more than quadrupled.
The rest of the decentralized FX market grew by an average of 150%.
The exceptions are LRC and RUNE, which grew in much the same way. But if you look, their deflationary measures are just as good. LRC-3.9. RUNE – 11. And the demand for these pieces (volumes) was great.
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#Investment #calculate #attractiveness #cryptocurrency
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