Crypto Sunday Episode 33.
It was a hectic week in the markets with many important events. Here we will discuss the main financial events of the last week, but since the majority of our audience are investors in the Elrond ecosystem, I must also explain why staking rewards have decreased, how much they will decrease, when and what to expect.
The rewards at the farms on the Maiar Exchange have also decreased. Before we get to work, I want to thank you for still being with us in these times, to congratulate you for not running away from investments during this period, and to assure you that you will be the winners compared to those who left the market when they return in the next Bull Run, brought by the irresistible news.
The real money is made by buying now, resisting emotions, negative news, and holding the portfolio at all costs until the next growth cycle. It’s time, as I said, to become the first millionaire in your family, and there might not be as good a chance in the next 10–15 years.
Let’s start with what interests you the most, decreasing rewards for those who stake Egold. Why did this happen? Well, just like the famous halving of Bitcoin, Egold also has a similar system of reducing rewards, respectively inflation.
Unlike the Bitcoin halving, which, as the name suggests, is a halving of the rewards as it happens every 4 years, the reduction of the Egold rewards takes place every year on July 30, and the reduction of the rewards is approximately 23%.
As you probably already know, the entire crypto market is influenced by the Bitcoin halving.
Every time Bitcoin reduces its inflation, its price increases, and with it, the entire crypto market inflates. Of course, everything is inertial, and thanks to the euphoria of investors, the market grows more than necessary, and then it deflates inertially and again more than necessary.
This is how crypto market cycles are formed, presented in a very simplistic way. That’s why I said at the beginning of the video that the real money is made by buying now, because now the prices of coins are undervalued, and in the bull run they are overvalued. Your job as an investor is to buy now, when prices are undervalued, and sell when prices are overvalued, then repeat this process.
Now back to Elrond. On July 30, 2022, I entered the 3rd year of rewards. In year 2, the rewards of validators were on block 1,746,636 EGLD.
For those who don’t know how long a block lasts on Elrond, you should know that it lasts 6 seconds. So in the last year, a maximum of 1.75 million Egold coins were issued every 6 seconds, which were offered to stakers and delegates. I say maximum, because the Elrond network charges a small fee for each transaction made. From this fee, 90% goes to the rewards of the stakers, and the network introduces on the market, only the difference of the necessary coins.
In conclusion, when the network enjoys widespread adoption, the Egold coin will no longer be inflationary at all because all the coins offered to those who stake Egold will come from transaction commissions paid by users.
Moreover, it will even be deflationary, because a part of the commission of each transaction is burned, and many mistakenly send Egold coins that disappear from circulation, and others lose access to their wallets, and with access to the wallets, it disappears for good as well as access to the coins in those wallets.
Now let’s take a look at this drop in rewards and realize its appeal.
If we said that in the last year, the stakers’ rewards were 1.75 million Egold per block, starting from now, the rewards decrease to 1.54 million Egold per block.
The bad news is that from now on you get 23% less Egold for staking — the good news is that 2 million less Egold are issued in each block, thus reducing the inflation of the currency by 23%.
As we can see after the Bitcoin halving, the rebound in the new market takes place immediately, it starts with a certain delay and reaches its maximum effect after a few months or even years.
Last year, less than 4 months after the reduction of Egold rewards, the price of the coin increased by 627%, after which it collapsed.
Will it follow the same trajectory now? I would not be as optimistic, because the market also helped enormously in these results, going in favour of the project, but at the moment it seems that the market is going against us. However, if we have a small rally in the coming months, it is not impossible that we will see similar results.
Now let’s see how close the Elrond network is to becoming sustainable and the currency to lose inflation altogether. If in the last year 1,230 transactions per second were needed for the network’s commissions to be sufficient to pay the stakers’ rewards, from now on we only need 1,085 transactions per second.
Sounds like amazing news for the project, doesn’t it? Let’s also take a look at the number of transactions per second that the network performed in the last 24 hours, today, July 31, 2022.
In the last 24 hours, the Elrond network processed 76,399 transactions. If we divide this by 24, the number of hours in which these transactions were recorded, and then by 3,600, the number of seconds that an hour contains, we find that in the last 24 hours, the Elrond network processed an average of 0.88 transactions per second.
From a necessary 1,085 transactions per second, for inflation to stop, today we have less than one transaction per second. This means that we would need 1,232 times more transactions for the network to become sustainable this year.
Today we have 1.75 million users, if the number of transactions per second remains directly proportional to the number of users, we need to increase the number of users by 1,232 times. This means that we need over 2.1 billion users, i.e. half of the planet’s population that has access to the Internet.
Obviously this is impossible, but the good news is that with the passing of each year, the network will need a smaller and smaller number of transactions to get rid of inflation.
Taking into account that the Maiar exchange is at the beginning of its life, and that it is being built massively in the Elrond ecosystem, following that many projects will launch products, services and tokens on this network, I estimate that the number of transactions per second will increase exponentially from now on.
The average number of transactions per second performed by the network over the entire period of the network’s existence is 0.84, thus summing up to now, 53.5 million transactions performed.
The project is still very young, and the opportunity is still great, but still nothing guarantees success. It all depends on the adoption. Will the world continue to hold coins at stake as the rewards decrease? I’m curious too. In year 10, for example, the rewards for those who will stake Egold will be approximately 0.5% annually.
What will be the price of an Elrond coin in year 10?
Good question.
Everything depends on the adoption and the number of transactions per second that the network will perform. It may just as well be $1,000, $10,000 or $10 if the project will not enjoy adoption.
Being in this currency at the beginning of this project, we can still enjoy low currency prices and high interest rates. With the passage of time, these numbers will reverse, and as a result of which interest rates will decrease and the price of the token will increase.
We are still in the period when ordinary people can still afford to own a whole Egold, which I don’t think will be possible in 5–10 years. The entire crypto market is still in its infancy. The entire market is worth a trillion today. Just imagine that in a few years, if the adoption is as expected, we will see individual projects with a capitalization of over $1 trillion, just like the big companies listed on the stock exchange today.
Will Elrond be one of the winning companies in the race for decentralization? It cannot guarantee us anything, but it is definitely among the top 10 projects with potential. Will there be only one winner? Of course not. There will definitely be at least 4–5 projects that will dominate this market.
What would it mean for the price of an Egold, for the project to reach a capitalization of one trillion $? Even if the number of coins in circulation will reach the maximum of 31 million, we would still see a single Egold coin at over $32,000.
Is it worth the risk to invest in this project now that a coin is $50? For some yes, and for others no. This is not financial advice, but only a fundamental analysis of the project and the market. You know your financial situation best and you are the only one in a position to decide where to invest your money or that of your family.
Can the Egold price drop even more now? Remember that the only price below which a cryptocurrency cannot fall is 0, but it can go down to 0 extremely fast, just like the famous Luna project. Be sure that you know and assume the risks that each investment brings, along with the opportunities.
Along with the reduction of Egold rewards, Mex rewards on Maiar Exchange were also reduced. Why did this happen? Well, the number of coins entering the market with the passage of each block remains the same, namely 1 million.
By adding a new project, namely Cantina Royal, to the reward farms in Mex, the money for the rewards was taken little by little from the other farms, thus lowering the yields for each of them.
That’s all about Elrond today, let’s take a very brief look at the most important financial events of the last week.
The most important was certainly the meeting of the Federal Reserve, after which the reference interest rate of the dollar was increased by 0.75%. Before this meeting, we created a questionnaire both on YouTube and on Telegram, in which we asked you how much you think the interest rate will be increased. It seems that you made the right choice this time too, and I’m glad to have such an educated and intelligent audience.
What happened after this interest rate hike? Well the markets exploded. Why did this happen? In order to act quickly, Jerome Paul started to reduce the harshness with which he acted against inflation, which gives hope to investors that at the next Fed meeting, in September, the interest rate will be raised by 0.5%, then at the next one by 0.25% and then after one or two months to start reducing this interest, that moment being similar to the bottom of the abyss.
So with the idea that the light at the end of the tunnel can already be seen, investors started buying assets again with both hands. It remains to be seen if the market correctly understood this move or if they are just trying to induce the idea that everything is fine, for the autumn elections in America, and then the Fed will suddenly and aggressively raise interest rates, collapsing the financial markets.
America is in a technical recession in their second quarter with a decrease in gross domestic product ended last week. Jerome Powell is showing that rather than admitting the truth about the recession, he’d better redefine the term recession. He told us that although America is in recession, it is not actually in any recession, because it would be good to redefine this word and take into account factors other than the evolution of the gross domestic product.
It’s as if they’re telling us, ok, you don’t have money to buy food anymore? This does not mean that you are poor, let’s better redefine the word poor, and stop referring to it as we did 70 years ago. From now on, poor must mean not only that you have no money, but at the same time you live in Antarctica. This is how he claims that no one is poor anymore. Problem solved . We saved the planet from poverty.
Following America’s entry into a technical recession, the dollar collapsed against the European currency. Germany somehow managed to quell inflation, falling in the last month.
The annual inflation rate fell in Germany from 7.6 to 7.5, still above market expectations of 7.4%, so German indices collapsed after the publication of the results.
We also have the second quarter GDP of the major European economies. France exceeds expectations of 0.2% growth and surprises us with an increase of 0.5. Spain shocks us even more, growing by 1.1% compared to the estimates of 0.4%. Italy also exceeded expectations by 0.7%, with an increase of 1%. Germany strongly disappoints with a quarterly report equal to 0, although an increase of at least 0.1% was expected.
Thank you for reading until the end and until next time, take care of your money.
P.S
In case you would like to listen to this information with some visual effects, you can watch our YouTube video here.
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