One of the great virtues of the Blockchain technology is its decentralization. You don’t need to be part of any government or financial institution to start working on a project within a chain of blocks. This has led to the emergence of hundreds of tokens with different functions within the crypto market. That’s why today we explain you what signals you should take into account to know if a token has a future.
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Tokens and crypto companies
Nowadays, it has become a common point that the companies of the crypto world launch their own tokens within the Blockchain, to fulfill different purposes according to their sector.
Thus, we see cases like the Basic Atenttion Token of Brave Browser that serves to reward its users for viewing advertising within the browser. Or the best known Binance Coin, used by the company as a mechanism to provide advantages to its users.
However, not all tokens issued by crypto companies have an equally bright future. For, in most cases, these coins are issued without a defined plan behind it. In the short term, they lose practically all their value, ruining those who invested a lot of money in them.
And in this sense, one of the best signs that may exist to know if a token has no future, is if the company or organization behind it issues a large number of different currencies. Thus, a large number of tokens with different functions can be issued by a single token, or even several currencies with the same function. This is one of the worst signals a company can give, revealing that it has no defined plan for issuing its virtual currency.
This lack of definition regarding the function of a token for the future is often accompanied by changes in the token’s white paper. This is one of the clearest signs of the lack of seriousness surrounding a virtual currency.
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Control in the future
An even worse sign for the future of a token, however, is the control the company maintains over its circulation. Especially when only a small percentage of the total liquidity of the currency is in the market. This makes the token extremely susceptible to speculative impulses, in the face of sudden capital inflows or outflows from the market.
Usually, this problem is combined with a very large portion of the total liquidity of the token in the hands of the company issuing it. This portion goes by various names, ranging from „marketing budgets,“ „founder’s reserve,“ or „community growth funds. And, while not all the reserves that are named are negative, when mismanaged they can lead to the collapse of a token.
Therefore, in general terms, the more decentralized a token is, the brighter its future will be. This avoids the manipulations to which virtual currencies are often subjected when they are under the iron control of the company that issued them. A clear plan is also needed as to what the token’s function will be within the company’s ecosystem, so that it can be fully trusted.