Cryptocurrency Value Investing

Posted By Darren Winters on Dec 2, 2021


Cryptocurrency Value Investing

What determines cryptocurrency value investing, in other words, picking cryptos trading below their exchange value?

First, let us start with defining what gives value to any asset. So assets can have imputed value and intrinsic value. 

Imputed value is the assumed value given to an item because its actual value is not known or estimated. Money has imputed value which has evolved as societies advance. Shells, metal coins, and spices were all used as a form of money over time, and they have in common a computed value, the value that societies assigned to them over the ages. Notes and coins issued by central banks also have imputed value, and it facilitates the trade of goods and services.  

So Bitcoin also has imputed value because our current age is digital, bearing in mind more of our economic activity is digitalized and monetized. 

Who would have thought that ninety percent of those born between 1981-1996 defined millennials would value Bitcoin over gold.

There is another dimension to cryptocurrency value investing

Afrostar cryptocurrency

Cryptocurrencies have utility, unlike central banknotes and coins

Cryptocurrencies are also a commodity. Put simply cryptocurrencies such as Afrostar are the building blocks of the digital age Web 3.0. Moreover, we are just at the tip of the iceberg in understanding how to use blockchain technology in creative ways, which is already building a burgeoning digital ecosystem.

To better understand cryptocurrency value investing let’s take a look under the cryptocurrency bonnet so that we can better understand and identify the critical components of blockchain technology.

Cryptocurrency value investing is about investing in a blockchain network protocol that drives blockchain technology.

The simplest way to define blockchain is an encrypted digital ledger distributed over the internet. 

So investors of cryptocurrencies are buying a token, a piece, of the blockchain network.

Decentralized finance DEFI, peer-to-peer financial products and services available to anyone with an internet connection, and non-fungible tokens, NFTs are just a few examples of how blockchain technology revolutionizes services.

Cryptocurrency value investing is about understanding the main types of consensus mechanisms used in blockchain networks

Most blockchain projects use one of the three currently most common consensus algorithms: Proof of Work (PoW), Proof of Stake (PoS), or Delegated Proof of Stake (DpoS). 

Each mechanism has its pros and cons, PoW is more secure than Pos, which is a faster but less secure network.

Scarcity of network, demand for network determined by a number of addresses, security of the network, and ability of the network to charge high gas fees are the fundamentals driving prices. We believe the PoW network will be able to charge higher gas fees because developers will place the security of the network as a main priority over the price. The fact that you need more resources and computer hardware to solve high-level encryption will make this network secure and valuable for high-end business activities that run smart contracts. So the European Central Bank issuing bonds on an ethereum PoW blockchain network, thereby bypassing third-party banks, is an example of how the technology is adding value and revolutionizing finance. 

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