Topic: Where is the actual value of Altcoins coming from? (Read 1040 times)

It should really have nothing to do with value of the company unless the token actually represents ownership. In most cases, tokens are an asset that can generate revenue, so (in my opinion) the proper way to value a token is to look at the potential revenue (which seems almost impossible to do for most companies right now) and value the token based on a risk-adjusted yield on cost.

Think of a token like owning a taxi medallion in NYC. You can't legally drive a taxi unless you have a medallion, so the price of one fluctuates based on how much money one can earn you and the risk/volatility of those earnings relative to other investment options.

Before Uber, owning a medallion pretty much guaranteed consistent income, so an owner might be happy with a 5% yield for the risk. Uber has changed the market dramatically, so now owners might require a 10% yield because of the added risk.

To be more specific, let's say pre-Uber a medallion owner could expect $50k per year in income. The value of that medallion would be be $1 million ($50k / 5%). Let's say after Uber, an owner can only expect $35k per year, with less certainty. The value would now be $437,500 ($35k / 8%).

Of course, estimating revenue is hard for altcoins because they are so new, but it should get easier in time.

I think the market will transition to this approach in time, but right now altcoins are mostly just trading on pure speculation.

One last point - Similar to tokens, part of what gives a medallion its value is the fact there's a limited supply. Even the risk that more could be added would have an impact on value, which is why understanding hard caps and knowing what happens to unsold tokens is important.

Some of them have features that bitcoin doesn't have - see Ether, Monero etc. Some are used to move money because bitcoin fees are too high, and by definition this means buying and selling the alts as you move them about. And some of it is speculators piling in because they feel it's a cheap way to earn some bitcoin - buy some undiscovered alt, watch the price rise, sell for bitcoin.

Same as that happens with bitcoin, altcoins too have certain market value as well certain market circulation volume. This will make the demand to supply difference and based on this the price fluctuation as well the growth happens. Even now heard of a news that altcoins value were made by the illuminati's.

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?

What actually assigns the particular value to the token though? Is there an algorithm involved that weighs the total value being traded at any given time or the total amount or token-holders?

When the BTC price falls, what is the actually mechanism behind it that determines it falls this much? I don't expect anyone to have a perfect answer, but speculation isn't a thing. Speculation, the concecpt, can't actually do anything. The speculation can cause people to buy it and then maybe that fulfils some criteria that allows the price to increase? Speculation can't fly out of your brain and alter the price like some little demon. There must be something else to it.

Take the increase of price correlated to the increased investment into the token. So I pay Joe for 1 BTC and he transfers that 1 BTC to me. How does that transaction affect the price?

Even the consider the money ICOs raise. So I understand that may set the initial cap and token rate, but how do future trades affect the price? Does anyone have an almost exact answer? How is it the supply-and-demand changes the price as we see it?

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?

It should really have nothing to do with value of the company unless the token actually represents ownership. In most cases, tokens are an asset that can generate revenue, so (in my opinion) the proper way to value a token is to look at the potential revenue (which seems almost impossible to do for most companies right now) and value the token based on a risk-adjusted yield on cost.

Think of a token like owning a taxi medallion in NYC. You can't legally drive a taxi unless you have a medallion, so the price of one fluctuates based on how much money one can earn you and the risk/volatility of those earnings relative to other investment options.

Before Uber, owning a medallion pretty much guaranteed consistent income, so an owner might be happy with a 5% yield for the risk. Uber has changed the market dramatically, so now owners might require a 10% yield because of the added risk.

To be more specific, let's say pre-Uber a medallion owner could expect $50k per year in income. The value of that medallion would be be $1 million ($50k / 5%). Let's say after Uber, an owner can only expect $35k per year, with less certainty. The value would now be $437,500 ($35k / 8%).

Of course, estimating revenue is hard for altcoins because they are so new, but it should get easier in time.

I think the market will transition to this approach in time, but right now altcoins are mostly just trading on pure speculation.

One last point - Similar to tokens, part of what gives a medallion its value is the fact there's a limited supply. Even the risk that more could be added would have an impact on value, which is why understanding hard caps and knowing what happens to unsold tokens is important.

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?