How Mainnet Launches Affect Price was written by David Akilo, and it’s included in issue #12 of 21Cryptos Magazine. To read more articles like this subscribe today. To read other free articles check out our Magazine category. Follow us on Instagram, Facebook and LinkedIn.
This article is from an earlier date and as such can contain figures that were actual at time of writing.
The crypto world is ripe with information being thrown at us from every possible direction. One must be a skilled investor to sieve out the irrelevancies and pick out the essential data from all the hype, FOMO or FUD that surrounds this space.
Investors and traders rely on a number of tools to help them make timely decisions, but just like the stock market, news stories can also affect the value of an asset in the crypto market, and therefore, this should factor into a trader’s overall strategy. Information overload combined with the inherent complexity of the market make it difficult to make sound investment decisions.
So, what’s a mainnet?
A mainnet is a blockchain network that is capable of transferring a digital currency from a sender to a recipient. This is the network where transactions take place on a distributed ledger and are a step-up from testnets which merely test the transaction functionality of the blockchain network. The mainnet helps give investors and speculators confidence in the practicality or realworld application of the project.
Only 8% of projects succeed – can mainnets predict long-term viability?
Crypto’s biggest critics have often claimed that digital currencies are ‘all hype and no product.’ Could they be right? When it comes to cryptocurrencies, finding the right project to invest in has become the proverbial needle in a haystack adventure. Since the Bitcoin boom in 2017, thousands of crypto-based projects have entered the market, but not all of them have been successful. Studies carried out by some crypto monitoring groups have revealed that over 1,000 cryptocurrency-related projects have failed in 2018.
Furthermore, China Academy of Information and Communications Technology (CAICT) has claimed that only 8% of more than 80,000 blockchain projects ever launched is still active today. Blockchain projects are tend to have a lifespan of approximately 1.22 years. These statistics paint dire prospects for investors willing to go down the blockchain road. There has to be a way of sieving out potentially solid projects from scams and other impractical crypto ventures. Many pundits in this space are now pointing to mainnets as a suitable yardstick for gauging the viability of a cryptocurrency project.
Does a mainnet launch really determine project value?
Wouldn’t it be great to have a trusted indicator for knowing when the price of a coin will go up? Some investors think a mainnet launch is the best way to tell if a coin will reach the ‘moon,’ but the truth is, it doesn’t always pan out this way.
Paying some attention to the crypto market will reveal that many tokens get huge spikes around the time of their mainnet launch; this is no surprise since we have already established the fact that mainnets boost the investor’s confidence in a project. However, something else happens after the initial price hike, the value gained seems to trickle down a few weeks after the mainnet.
There are two possible reasons for this. It could be that there has been a miscalculation regarding the actual value of the project or the price of these tokens has been artificially inflated only to be sold off for profit. Any of these two outcomes are realistic in the current crypto market; however, it is difficult to actually get a read for how mainnets affect cryptocurrencies, because the current market structure’s loose regulations make it tough to determine the real base value for any cryptocurrency.
With this in mind, investors don’t have a lot of options. They just have to trust a project better when they get wind of a mainnet launch even though the project could be overvalued.
A mainnet launch factors into the success of a project, but by no means should it be used as a yardstick to determine the overall value of any crypto project. The mainnet is the first step in product development and should only be seen as a sign that a project is serious and deserves some attention. Short-term traders stand to benefit the most from mainnet launches, as they can capitalize on the frenzy buy off and escalating prices, but the focus should be on making quick profits in the short-term and not hodling.
If short-term trading is what calls out to you, then examining upcoming mainnets of exciting projects should become your hobby, and most importantly, it should form a core part of your trade strategy.