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Welcome readers, thanks for subscribing! The Altcoin Roundup newsletter is currently being written by Cointelegraphs resident newsletter writer, Big Smokey. In the coming weeks, this newsletter will be renamed to Crypto Market Musings. This is a weekly newsletter that provides forward-looking analysis and tracks emerging trends in the crypto market.
The publication date of the newsletter remains unchanged and will continue to feature content focused on a more macro-level technical and fundamental analysis of cryptocurrencies to identify key shifts in investor sentiment and market structure. . Enjoy!
Investing in decentralized finance (DeFi) tokens was like shooting fish in a barrel when the bull market was in full swing, but now the sector is seeing less influx than it did during the market’s heyday. , it is much more difficult to identify good deals in this area. .
Over the DeFi summer, the protocol has been able to attract liquidity providers by offering three- to four-digit yields and mechanisms such as liquidity staking, asset-backed lending, and token rewards for staking. . The big problem is that many of these reward offerings are unsustainable, with massive emissions from some protocols causing liquidity providers to automatically dump their rewards, putting constant selling pressure on the price of the tokens. It took a while.
The Total Value Lock (TVL) war is another challenge facing DeFi protocols, where investor capital is constantly being contested to maintain the number of users willing to lock funds within the protocol. I had to. This allows mercenary capital from whales and other cashflash investors to essentially airdrop funds to platforms that offer the highest APY rewards in a short period of time before eventually dumping rewards on the open market and A scenario was created to shift investment funds to greener pastures.
Similar activity has also taken place on platforms that have secured a string of funding from venture capitalists. VCs promise funds in exchange for tokens and these entities exist in the ranks of the largest token holders in the most lucrative liquidity pools. The looming threat of token unlocking from early investors, The high reward drain, and the steady automatic dumping of that reward, led to constant selling pressure and discouraged investors from making long-term investment decisions based on fundamental analysis.
Each of these scenarios combined created a vicious circle where protocol TVLs and platform native tokens were basically booting, pumping, dumping, and then obscuring.
Rinse, wash and repeat.
So how do you go beyond candlestick charts to see if it’s actually worth “investing” in a DeFi platform?
Let’s see.
Here are two charts.
Yes, one goes up and the other goes down (laughs). Of course, that’s the first thing investors look for, but there’s more. In the first chart, we can see that Algorand (ALGO) has a circulation market cap of $2.15 billion and a fully diluted market cap of his $3.06 billion. Still, that his 30-day earnings and annual earnings are $7,690 and $93,600 respectively. It’s eye-opening.
Going back to the first chart, while maintaining a market cap of $2.15 billion and supporting a wide ecosystem of various decentralized applications (DApps), Algorand only made $336 in revenue on October 19th. I know it didn’t work out.
Unless there is something wrong with the data, or some metrics related to Algorand and its ecosystem are captured by the token terminal, this is shocking. Also note that there are no token incentives or supply-side fees for
RELATED: 3 New Crypto Trends to Watch While Bitcoin Price Stable
GMX, on the other hand, is another story. Maintaining a market capitalization of $272 million and his annual revenue of $28.92 million, GMX’s cumulative supply-side fees have steadily increased to $33.9 million since April 24, 2022. Supply-side fees are service providers, including liquidity providers.
Before investing in any DeFi project, we recommend checking the total token supply, circulation supply, inflation rate, and issuance rate. These metrics measure the number of tokens currently in circulation in the market and the projected growth (issuance) of tokens in circulation. When it comes to DeFi tokens and altcoins, investors have to worry about dilution, hence Bitcoin’s (BTC) supply cap and low inflation appeal.
As you can see below, compared to BTC, ALGO has higher inflation and projected total supply. ALGO’s total supply is capped at 10 billion, with data showing there are currently 7 billion tokens in circulation, given the current revenue generated from fees and how much is shared with token holders. And supply caps and inflation rates are less reliable.
Before taking a position on ALGO, investors should look for growth and daily active users in Algorand’s DApp ecosystem, which obviously requires rising fees and revenue.
Two other important metrics to check, whether your earnings are high or low, are active addresses and daily active users if data is available. Algorand has a market capitalization of billions of dollars and the maximum supply of ALGO is his 10 billion, but the question is whether the ecosystem growth is poor due to low annual revenue and few token incentives occurs.
Looking at the chart below, we can see that ALGO active addresses are rising, but in general the growth is flat and the spike in active addresses appears to follow a spike in prices and selloffs. increase. As of October 14, Algorand had 72,624 active addresses.
Like most DeFi protocols, the Polygon network has seen a steady decline in daily active users and MATIC prices. CryptoQuant data shows 2,714 active addresses, which pales in comparison to 16,821 on May 17, 2021.
Yet, despite the decline, data from DappRadar shows significant user activity and volume spread across different Polygon DApps.
The same cannot be said for Algorand DApps.
Currently, the cryptocurrency market is in a bear market, which complicates trading for most investors. At this point, investors should probably just sit back and take a kiss-and-prayer moonshot for each little breakout that turns out to be a bulltrap.
Investors may be better served by tracking data to see when new trends emerge and looking deeper into the fundamentals that may underpin the sustainability of new trends. I have.
This newsletter is Humble Pope Substack He is also the author of Cointelegraph’s resident newsletter. Every Friday, Big Smokey writes market insights, trend how-tos, analysis, and early research on potential emerging trends within the crypto market.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investment and trading movements involve risk. You should do your own research when making a decision.
