Two-factorial Theory of Crypto Investments: Who is the Dark Horse?
The price of cryptocurrency basically is determined with two things: tech and marketing. The current market is unmatured and full of newcomers. Therefore, many people often don’t understand the differences between grow based on tech and grow based on marketing.
Good tech does not mean that the project has a ready ecosystem (because all crypto-projects are still in the early stage of development), but that it is more developed than competitors.
All projects can be divided in four groups based on tech and marketing:
1. Good tech and marketing: Benchmarks
2. Good marketing and poor tech: Hype
3. Good tech and poor marketing: Dark horse
4. Poor tech and marketing: Black box
In short term marketing is more important for price than tech. In long term tech is more important than marketing.
Let’s look on some examples.
1. Bitcoin and Ethereum are surely leaders and benchmarks. These are the most reliable projects at the moment. My theory is not about the prediction of their price. It is important that they are the benchmark for all other projects.
2. For the development of tech most projects need to spend at least a year. If the project is new and has very good marketing, the price will increase. Price will include future tech. Although this is good in a short-term, it could be bad in long-term as tech may be not so good as expected.
Good examples of Hype — EOS and Cardano. EOS capitalization is currently about $1,9 bln., although they have only test-net and 40% of tokens is not issued yet. Cardano has $2,7 bln. capitzlization but a tech has a very long way to go.
I don’t say that this projects will have poor tech. No! But currently they only promise to have good tech.
3. Most interesting situation is with dark horses.
Sometimes the project with good tech has poor marketing. Developers do not pay enough attention to marketing, because they don’t have such experience, or it is their principled approach (tech must speak for himself).
As you understand, for the investor this is the best situation. Tech is not fully included in the price. So, you can buy the project very cheep.
Historical example — Antschares (before rebranding to NEO). Antschares had really bad marketing! (you can find lot of posts about it on Reddit). Even their official site contained grammatical mistakes.
After rebranding and improvement of marketing the price of NEO made 1000%, GAS (AntCoin) — 3000%. Now NEO is still underestimated, but has much better marketing.
Another example is ARK. ARK has a good tech, professional team and well timing. Community on Reddit often complains about bad marketing, but lack of marketing was the official strategy of this project. Now the situation is changing .
Overhyped projects are more common for cryptocurrency than dark horses. In short term dark horses often disappoint investors, but in long-term they have very high potential because their tech is not fully included in current price.
4. 90% of all other projects nowadays are dark boxes. They are in the early stages of the development, so both the tech and marketing are poor. Investments in them are the most risky. To understand whether to invest in them, you need to wait until tech or/and marketing will be clear.
Checking the theory
Is the theory correct, time will tell.
However, indirect evidence of the theory is the ratio of number of subscribers to Reddi and project capitalization. This ratio is higher for hyped projects and lower for dark horses.
Let’s have a look (10/12/2017):
Ethereum: 185 783 Reddit, $43 236 737 457 cap.
EOS: 14 339 Reddit, $2 042 752 129 cap.
Cardano: 10 370 Reddit, $2 847 466 449 cap.
NEO: 43 199 Reddit, $2 265 971 500
ARK: 13 119 Reddit, $342 483 780 cap
Ethereum: $232 727 per 1 subscriber.
EOS: $142 461 per 1 subscriber.
Cardano: $ 274 587 per 1 subscriber.
NEO: $ 52 454 per 1 subscriber.
ARK: $26 106 per 1 subscriber.
We see that relative interest to ARK is as high as interest to Cardano and EOS, but the capitalization of the project is 6–8 times lower. NEO has relative the same capitalization as Cardano and EOS but 3–4 times higher number of subscribers. Both project could be underestimated by the market because of poor marketing.
Understanding the type of the project investor can easily make a decision about short-term and long-term investments.
Dark horses are best long-term investments. Overhyped projects suite only for short-term investments and qick money, but it is dangerous to HOLD them.
I mention only some examples, but the same analysis is easily applied for every project. You can conduct the same research.
What about the team? I did not mention the team as a separate factor because it can be reduced to first two factors. Professional team is the key condition for good tech. «Superstars» in the project often contribute to the marketing and sometimes create hype.
This is an unpaid article. The author has some investments in NEO, GAS and ARK (becouse he belives in his theory).
If you want to thank the author: