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In a groundbreaking analysis spanning from 2010 to 2023, the researchers delved into the top 100 cryptocurrencies, creating one of the most extensive studies to date on the factors influencing long-term crypto valuations.
The key revelation from this research underscores the pivotal role of active wallet addresses, which emerged as the driving force behind price surges in an impressive 94% of the examined crypto investments.
Contrary to mainstream crypto listing platforms like CoinMarketCap, active wallet addresses remain an underappreciated metric that demands meticulous exploration. In our perspective, user engagement should take precedence, emphasizing the significance of this figure.
Comparable to metrics such as Daily Active Addresses (DAA) or Monthly Active Addresses (MAA), Active Wallet Addresses offers a transparent insight into the actual user base. In likening cryptocurrencies to businesses, this metric essentially quantifies their customer base—a fundamental aspect that should be accorded primary consideration.
Transactions Drive Value
In nearly half of the studied crypto investments, a surge in transaction volume was correlated with higher prices. While logical, it’s a less dependable metric than user numbers due to its susceptibility to manipulation, such as wash trading.
Drawing parallels to social media dynamics, crypto networks thrive on active users, fostering network effects. A crypto with a growing user base sees transaction numbers as a valuable “+1” to its overall appeal.
Unlike widely monitored trading volumes, transaction numbers often go unnoticed. It’s akin to choosing between a currency used only by a select elite and one embraced by a broader audience, highlighting the distinction between trading volume and genuine transaction activity.
Scarcity Adds Value
Bitcoin’s acclaimed limited supply, capped at 21 million, distinguishes it from most projects that can generate tokens endlessly, potentially diluting value. The study highlights that limited supply can enhance token scarcity and consequently elevate its value. However, scarcity alone doesn’t guarantee a sound investment.
Consider limited supply as a potential catalyst for investments paired with substantial user engagement—a synergistic boost akin to adding fuel to an already active flame.
In conclusion, prioritize investments demonstrating vibrant and expanding user engagement. An added advantage is found in those with both robust transaction activity and a limited supply—considered valuable attributes. While these factors are key, it’s essential to also evaluate the team, technology, regulatory landscape, and potential challenges.
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