Do You Know The Actual Value Of Your Crypto Investment? - Productive VS Unproductive Assets

If you go to Coingecko and look at the prices today, or any other day, you would think that people know why they are paying $3.5K for one Ethereum or 400 bucks for one Binance coin. Just a year ago you could buy 1 ETH for $80 and one BNB for $6. What changed in the past 400 days that made such a radical change in the crypto markets? Let's have a look.

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If you were here last year you probably remember having a thought that went something like this:

Oh look, ETH dropped to $80. Looks like it is going back to $10 so I can wait a bit longer before buying more...

Things took a wild turn after that moment and buying ETH right now is such a moral dilemma. So many questions are involved in the process.

Is it really worth this much? Will people keep paying $300 per transaction just to ming an NFT? If the fees go down wouldn't the value of ETH go down as well?

These questions can be a pain but if you are asking them you're already on the right track.

Productive Assets

To identify a productive asset all you have to do is look at its utility. If we use Ethereum as an example, there are many use-cases for this token but we can categorize all of them in three main categories - Staking, Farming, and Payments. In the future there will probably be dozens of more opportunities for ETH holders but let's stick with the present for now.

Staking

As of recently, ETH staking has consumed almost 7 Million Ethereum tokens and the number keeps rising. Those that staked their ETH are earning passive rewards and this whole process is validating the fact that ETH is indeed a productive process. The only problem with this particular case is that once you stake your ETH you can't unstake it for an unknown period. Even the rewards you accumulate can't be withdrawn until ETH 2.0 launches. Check the FAQ form more fun facts.

Another problem is price fluctuation. If you look at your investment in ETH terms, your stack is always growing but if the price goes down and you measure your success in USD terms, it won't be as productive as you would want it to be.

Farming

If you are heavily involved in farming then you know that every single farm on every single chain will offer a pool where you can stake your ETH and earn passive rewards. This again validates the claim that ETH is a productive asset, only in a different way. In other words, ETH as an asset is so valuable that farms will give you seemingly infinite rewards for only 4% of your ETH stack. This, of course, is only true in theory most of the time.

Payments

Payments, in any shape and from, will always be the main driving factor for increased demand in the market. In the case of ETH, people simply need it if they want to transact on the Ethereum network or want to make an online purchase where ETH is the preferred form of payment. The second part may not apply to online stores yet but it definitely applies to the NFT market which is booming on the Ethereum network.

In this specific case, ETH holders can still consider their asset as productive because there is a growing demand in the market for that specific asset. Sitting in a wallet it may not accumulate rewards but theoretically, the value of the token will need to increase over time due to the burning mechanism and the ever-growing demand.

In simple terms, if ETH was the internet, owning it would be the equivalent of owning a small percentage of all the bandwidth that will ever exist.

Unproductive Assets

An unproductive asset would be the complete opposite of what was said above and a good market example for that would be Zcash. It is a currency that is currently in the top 80 but it is a prime example of an unproductive asset.

Zcash is a privacy coin that has found its place among the "OG" cryptos and according to the website, it is aiming to bring both privacy and convenience for mobile payments, among many other forms of payment. But can you really use it for anything?

Without diving deep into the privacy rabbit hole and the whole "privacy coins are only used for buying drugs online" argument, we can clearly see that ZEC and ETH are hardly comparable when you look at them as assets. So why would Zcash be even close to the top 100 when you can hardly do any of the things with it that you can with Ethereum? The answer is speculation.

Speculation

I already talked about the guessing game we are all playing and it is by far the most defining factor in the whole crypto market.

  • How can Ripple be a $50 Billion asset if it still generates zero profit as a business?

  • How can Cardano be worth anything for the past six years went it didn't even have smart contracts enabled and no usable platform?

  • Why is BNB worth $600 now and only $6 a year ago when its main use-case is paying for transactions on a centralized chain completely controlled by one exchange?

The answer to all of these is speculation and the reality of the situation is that we mostly don't have a clue how much one Bitcoin should be worth. That is why we are selling it and buying it at seemingly random prices in hopes that someone else will come and pay more for it in the future.

But, if you actually take the time to DYOR you may end up with a reasonable estimate for the next 10-20 years. Everything beyond that is just your imagination because we still can't comprehend the full impact of crypto as a whole. At the same time, it can bring immense change but it can also make no impact at all. Hence the guessing game.

Which Is Better?

From my personal point of view, accumulating productive assets is the way to go. Cryptos that are designed to be a currency and nothing beyond that have a very slim chance of appreciating in value in the long-term, in my opinion. People will use whichever is the fastest and more convenient while privacy and security will be overlooked, as always.

If we take a look at the very long-term productive assets are a better bet. If you sell one card in Splinterlands today you may get a few hundred dollars out of that sale but if you rent it for the next 3 years it will probably bring you a lot more value and your asset will always be in mint state.

We are definitely drifting towards the metaverse where digital assets will be the hottest thing in town. So, would you rather have some Zcash on hand to pay for everything in the metaverse, or would you rather be the partial owner of the metaverse and rent out your unused assets for Zcash? That is the real question.

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