The Takeaway: 3 Fundamental Factors to Assess Cryptocurrency Investments
Karl Montevirgen of Halifax America LLC - - Tue Mar 13, 11:46AM CDT

What Are They?

1 - Intrinsic Value: Though the term in this context is still evolving, for now, intrinsic value refers to the sum of services that a cryptocurrency and its underlying technology provides.

2 - Protocol Coin vs. Utility Token:

  • A protocol coin is there to support an entire blockchain ecosystem; for a protocol coin to be rendered obsolete, the entire ecosystem must collapse.
  • A utility coin is built atop an app within a blockchain ecosystem; for a utility coin to be rendered obsolete, all it takes is for nobody to use that app.
  • Both have a different set of risks and opportunities for wider usage--choose carefully.

3 The Motivations Driving Demand
  • Last but not least, you need to figure out of a cryptocurrency is solely used for trading or people might actually need to use it for reasons other than financial speculation.
  • Also, try to determine if a crypto, most likely a utility token, is targeting a particular industry, and do your best to assess the viability of its usage within that industry; ultimately, it all boils down to market demand and the nature of that demand, whether speculation or industry use.

THE TAKEAWAY: These three fundamental factors--intrinsic value, coin type, and the motivations driving demand--provide a basic framework to help you begin assessing a potential cryptocurrency investment (emphasis on "begin"). Although there are several other factors to consider, the ones mentioned above can serve as guideposts to help you direct your research.

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