And the question to keep in the back of your mind isn’t necessarily “will this appreciate against the dollar?” but “Will this appreciate against (BTC, ETH, SOL, whatever you prefer)”. Most crypto assets are highly correlated and move together, and if you’re holding anything besides the big foundational coins, it should be based on some belief that... See more

Some tokens allow you to tap into the earnings of the protocol they represent. If you hold SUSHI, you can stake it to earn a share of the Sushi protocol revenues, currently for about a 10.5% APR.

What about Ethereum? The circulating supply is around 118,000,000, and there’s no cap on how many Ether can exist. But Ethereum’s net emissions were recently adjusted via a burn mechanism so that it would reach a stable supply, or potentially even be deflationary, resulting in somewhere between 100-120m tokens total. Given that, we shouldn’t expect... See more

Belief in future value is often one of the most powerful drivers of demand. Bitcoin has no cash flow, no staking rewards, nothing. It just has the belief that it could be a long term store of value to rival gold. Or more ambitious beliefs like definancialization and hyper-bitcoinization. But it’s all beliefs at the end of the day.

For example, if you hold Ether you can stake it to help secure the network once Proof of Stake launches. In return for Staking your ETH, you get paid in more ETH, at a rate of about 5%.

Let’s start on the supply side since it’s a little easier to understand. The main thing you’re trying to figure out is:

Another form of ROI comes from “rebasing,” similar to a stock split where by holding a token and staking it, you continue to get more of that token as the protocol inflates its supply. This is how Olympus works and is why their heavy inflation rate is not necessarily a bad thing since you can retain the share of the protocol that you own. 

By reading the docs or whitepaper, you should get a good sense of how the supply is going to be managed, and what forces will drive demand for the token or cryptocurrency.

On the supply side, a token will increase in value if fewer of those tokens exist—we call that deflation. A token will decrease in value if more of them exist—that’s inflation. When you’re evaluating the supply side you don’t have to worry about things like whether the token has any utility, or whether it will generate income for its holders.... See more