everyone dreams of finding that 100x crypto gym but if you actually want to have a Fighting Chance Beyond just buying random coins and praying that one hits then there's one thing you gotta do Master tokenomics you see tokenomics is the key to a crypto Project's price performance and I'd be willing to bet that almost every 100x crypto gym in history has had great tokenomics that's why in this video I'm going to teach you tokenomics from top to bottom and if you watch the whole thing I guarantee you'll become a savvier investor now before you begin I want to be clear that this video is not sponsored but at the end of the video there will be a special offer for those of y'all who want to learn even more about tokonomics so just a heads up if you want to stay for that anyways tokenomics at its core comes down to two things supply and demand and as you can imagine that has massive impact on a token's price like even if a project has the best tech the best marketing or whatever that may not translate into great price performance unless it also has solid tokenomics so to help you understand tokenomics better let's break it down into two parts supply side tokenomics and demand side tokenomics starting with the supply side these are factors that control a cryptocurrency supply and there's actually three types of supplies out there but for the purposes of finding 100x gems we only need to focus on two of them maximum and circulating supplies maximum Supply is simple it just means the maximum amount of coins that can ever exist for a particular project and circulating Supply is the amount of coins that are circulating in the open markets and are readily tradable you can find these values for most crypto projects on sites like coin market cap or coin gecko now let's take a look at Bitcoin as an example it has a maximum supply of 21 million which means there will never be more than 21 million Bitcoins in existence this is why people call Bitcoin the hardest money ever created because there's a limit to how much can exist and it also costs a ton of resources to mine so no entity no matter how rich and Powerful can just Waltz in and decide to print more Bitcoin to dilute its Supply that's why Bitcoin is one of the most sought after Assets in countries with high inflation like Argentina Venezuela and turkey but things may get a bit more confusing when we look at projects like Solana if we look at its Supply you may wonder why it has a circulating supply of over 400 million but a Max supply of infinity well the reason is simple inflation some projects have a constant token inflation where the supply goes up forever as the network creates more coins to reward miners or validators I'd say in general we prefer not to have inflation when it comes to tokenomics but there are still a lot of inflationary coins that perform quite well so the rule of thumb is just to make sure that the inflation is not too high and I'll tell you in a bit how to do that anyways there's also projects with the inflation where tokens are removed from circulation through things like token Burns take ethereum for example every time there's a transaction sent to the network part of the gas fee is burned or removed so the more people transact on ethereum the more the supply is burned and at some point it can even become net deflationary over 3. 5 million AIDS have been burned since the merge took place and that may explain why eth has held up way better than its competitors during this past bear Market anyways in general if we're looking for 100x gems we want to find projects that have deflationary tokenomics or a maximum Supply some inflation is okay but just make sure it's reasonable and not too high and a quick way to tell if it is reasonable is to take its yearly inflation percentage and convert that to a daily dollar amount let's say you calculate that 10 000 XYZ coins are emitted every day due to network inflation then you multiply that by the price to get the dollar amount of that daily inflation and and ask yourself is it reasonable to believe that there's that amount of demand in the markets to match or exceed that amount of inflation if so then it's fine but if it's way too much like a hundred thousand being admitted every day then that could be a huge red flag I mean short-term speculation can overcome a high inflation rate but long term there's just no way now that's all I'm gonna say about a token Supply but another important factor to consider is its market cap which is defined as circulating Supply multiplied by price if you're looking for coins with 10x or even 100x potential you need to look for ones with lower market caps take BNB for example it's the fourth largest cryptocurrency with around a 37 billion dollar market cap if you're hoping for a 10x game then that means BNB would have to reach a market cap of 370 billion dollars which would put it on par with freaking Walmart and if you're hoping for a 100x gain then it would have to reach a 3. 7 trillion market cap which would make it worth more than Apple or Microsoft the two most valuable companies in the world so my point here is that that is super unreasonable and hence you have to look at much smaller projects with market caps of under 100 million or even under 50 or 10 million to get the most upside but of course those are also super unproven and carry way more risk than the larger cap projects so just keep that in mind now I just said that we should use market cap to gauge price potential but there's another surprising component here that matters and that's the price of the token if you think about it the price of the token should have no impact on its performance or upside it shouldn't matter if it's worth a penny or a thousand dollars because the amount of tokens out there AKA is circulating Supply affects how much the price can move but surprisingly the price of the token does matter because of something called the unit bias this is the psychological phenomenon that explains why it feels better to own 200 000 dogecoins rather than 0.
26 Bitcoin even though they're worth the same dollar amount people people like to own a lot of a whole number and by buying these Penny coins doobies feel like they're getting in early that's why when we look for 100x gems a smaller unit price is preferable assuming all else is equal now there is one more piece of nuance when it comes to market cap because remember a project circulating Supply can be quite different from its maximum Supply so while market cap equals circulating Supply times price there's another metric called fully diluted valuation or fdv that's equal to Max Supply times price this is an important metric because sometimes a Project's team may play Shady games with their tokenomics to try to trick investors who don't know better what they'll do is release a small percentage of their tokens into circulation so their market cap looks reasonable but they're fully diluted valuation is massive like 10 times larger or more so you'll have newbies be like wow this market cap is so small I'm getting in early I like it a lot but in reality the fully diluted value is massive already and most those projects will never be able to grow into it just think about it these projects will have to eventually release the rest of their tokens right and as they do that there's a high chance that the tokens price will drop I mean it is possible for a project to grow into its massive fdv if they have truly great fundamentals but that's rarely the case also even if they do grow into a large fdv that could be because the market cap Rises due to the supply increasing but the token price Remains the Same One great example of this is the H bar token from hedera hashgraph check this out from their launch until now the price has stayed roughly the same at around 5 cents but it's market cap went from 93 million to 1. 8 billion a whoppin 19x increase so how is that even possible well it's possible because they released a lot of the tokens along the way so when you multiply the price by an increasing circulating Supply that gives you a higher market cap without the token price necessarily changing anyways A good rule of thumb here is to look for an fdv of less than 10x a token's current market cap as that will help you avoid these Shady projects playing games with their tokenomics now another important metric to analyze alongside market cap is trading volume because it can tell us whether a Project's market cap is even reliable take this extreme case as an example say I create my own Kevin coin with a 1 billion circulating Supply then I sell one of those coins to my friend for one dollar well now the market cap of Kevin coin is 1 billion right because 1 billion tokens times the last traded price of one dollar equals one billion dollar market cap but that would literally have a trading volume of one dollar so the point is we gotta look for high volume to market cap ratio to make sure that the market cap number we see is reliable and legit anything above a point zero zero one for that ratio is decent in my eyes now say that the token you've been researching checks all those boxes so far and doesn't have any of the red flags well it's time to look into its token distribution we want to to make sure that the majority of the supply isn't held by Founders or Venture capitalists waiting to dump on retail investors so the first thing to analyze is a token's initial distribution and how the team raised its funding for this you can go to a site like coing Gecko and find an initial distribution chart like this and when it comes to a token's initial distribution we want it to be as widely spread out as possible that means more for the community and less for the foundation the team or early investors as those usually consist of only a few distinct entities now when it comes to initial distributions there's a 100 Fair launch on the far side of the spectrum this is where all the tokens are distributed to the users of a protocol and none are reserved for the founding team a great example of this is yearn Finance with their yfi token and fair launches are of course amazing but they're not always realistic to demand for every project so we don't necessarily want to restrict ourselves to only fair launches when we hunt for 100x gems but on the other side of the spectrum we have coins with a large percentage allocated to VCS or early investors and that carries significant risks so we do want to avoid those for one VCS bought their tokens at the cheapest price often times 100x or even a thousand X lower than the open market price and the bigger percentage they get the more potential selling pressure in the future which can keep a cryptocurrency's price down for a long time this is why you'll want to check the token's vesting schedule which shows you the amount of team or investor tokens locked up for a predetermined period of time vesting makes it so that investors can't sell all their tokens at once as that would crash the price so instead a Project's vesting program will periodically release tokens in batches to early investors or team members but you got to keep in mind that some tokens have very aggressive vesting schedules and the release of new tokens usually but not always coincides with the price drop so if you're looking at a token with an upcoming unlocked date it may be smart to wait until after the tokens are released as you may be able to buy it at a discount also the fact that there are vesting schedules and token unlocks means that we can't only focus on a Project's initial distribution because those tokens could have changed hands right so we also have to look at its current distribution too there are a few great tools for that by the way but I like to look at etherscan which gives us things like the number of holders and the token holders chart for any erc20 token once again we want there to be a lot of unique holders and for the top 100 holders percentage to be low the lower the better anyways for retail investors like you and I it's a good rule of thumb to look for tokens that are widely distributed and not dominated by VCS ideally your Project's vesting schedule is spread across a longer time frame and the token unlocks are not that aggressive or if they are you may consider waiting until the bulk of it is unlocked before you enter now that's all for supply side tokenomics but that's only half of of the picture in general we want projects with less Supply and more demand to get truly explosive price action but do you understand what drives demand for a particular crypto coin well this is where you'll need to understand demand side tokenomics and how that can impact a token's price so demand side tokenomics refers to all the parts of a cryptocurrencies designed that impacts demand for a token after all a project can be engineered to have the best supply side to economics but if there's no demand then it's going nowhere so the primary driver of demand for a token is this utility plain and simple this could take a lot of forms like perhaps you need the token to pay for gas fees on a network perhaps you need to hold it to access a particular protocol or perhaps you use it to get a discount on trading fees whatever it is you want a coin to have some really strong utility that people genuinely want to use it for like if holding some token gives you access to an app but no one really wants to use that app then there's going to be little real demand for that token this is why I'm not a fan of governance tokens by the way because governance or voting on changes to a protocol is so vague and not even a real utility in my eyes we've seen so many examples of this where governance is dominated by whales and the vast majority of token holders don't even bother to vote so instead I prefer coins like eth which are used for paying gas fees interacting with dapps and staking for rewards those are strong utilities if we're looking for 100x gems they need to have both utility plus some healthy speculation as that's the formula for rocket ship now speaking of staking for rewards that's another major driver of demand AKA offering direct Financial incentives to hold a coin or token one great example of this is the GMX decentralized exchange with its GMX token they distribute 30 of the protocol fees to stakers of their token while the other 70 goes to liquidity providers this generous profit share incentivizes people to buy and hold their tokens for the Long Haul and they're less likely to sell 2 as it generates continuous passive income for them overall we want some really juicy Financial incentive built into a tokens utility and we want it to be sustainable like gmx's model that way it won't be like the liquidity mining Ponzi nomics that we saw across all those D5 2.
