What these assets are.
WHAT A CRYPTOCURRENCY IS
A digital asset whose issuance and transfer are governed by a network's rules rather than an institution.
WHAT GIVES IT VALUE
Whatever people will pay, which rests on expectation rather than on any cash flow.
WHY THAT DISTINCTION MATTERS
Shares represent claims on earnings; these generally do not.
WHAT THAT MAKES VALUATION
Difficult, and contested.
WHAT SUPPLY MECHANISMS EXIST
Fixed maximum supply Predictable issuance without a cap Discretionary issuance by an issuer Supply reduced by destruction of units
WHAT TO ESTABLISH FOR ANY ASSET
How many exist How many will exist Who holds them How they were distributed
WHY DISTRIBUTION MATTERS MOST
Concentrated holdings mean a few parties can move the price at will.
WHAT TO LOOK FOR
The proportion held by the largest holders, which is publicly visible.
WHAT VOLATILITY MEANS HERE
Price movements far larger than in traditional markets, routinely.
WHAT THAT MEANS PRACTICALLY
Amounts can halve or double within short periods.
WHAT TO NEVER DO
Commit funds you cannot afford to lose entirely.
WHAT THIS CATEGORY DOES NOT PROVIDE
Investment advice. Decisions about holding these assets are yours, and carry substantial risk of total loss.
