It’s been a long, long bear market. Nxt has slipped from a dizzy high of $0.10 – a market cap of $100 million – to a low of less than a cent and a market cap of only $8 million. But despite that and even because of it, I think we’ve finally hit a tipping point.
If I had to assign a moment to the tipping point, it would have to be 11 May at 07:35:54. That was the moment when the mgwBTC market on AE dropped to 3300 satoshis and a prescient bitcoin whale picked up a million NXT in one trade
while, at the same time, another large SuperNET holder was taking the opportunity to cash out assets without slippage. Another 12.5 bitcoins were sold into the same 300 BTC wall over the next 40 minutes, but after that the price rebounded. A couple of weeks later some irrational exuberance led by China has pushed us back up to and over the 5k mark. (Whether this was caused by money leaving the overheated Chinese stock market and finding a handful of key alts, or whether it was BTC38 faking some volume to gain a reputation as the new exchange in town, we don’t know.) In any event, NXT has recovered around 50% since that low at 3300.
But this tipping point isn’t really about price. It’s been remarked before that market cap is largely meaningless and price does not equal value. As jl777 has said, ‘The market is technically a manic/depressive psychotic. That means it is delusional and says things that are, well, insane. Like LTC is 30x more valuable than NXT, or AUR is 10% of bitcoin, etc.’ Price and market cap should follow, but the market isn’t a good judge of value in these circumstances. The market sometimes overvalues things, like in the early stages where hype sucks in walls of money from excited speculators; it sometimes undervalues them, as when investors lose patience or get caught up in the mood of collective despair that swirls around a bear market. Price and value rarely coincide at all, and then only incidentally, like a stopped clock that is right twice a day.
Building the foundations
This is about the solid foundations Nxt has built over the last year, particularly its crypto-stock ecosystem hosted on the Asset Exchange. As I recently wrote in another article, it’s just possible that the horrendous bear market was the best thing that could have happened to Nxt, if not individual NXT holders, some of whom have seen their net worth slashed by 90%. It represented a massive injection of liquidity into key assets, a lot like quantitative easing or the boost to spending central banks try to engineer by cutting interest rates: if your money is going to be worth less tomorrow, you spend it today. Some people simply cashed out to bitcoin or fiat, but huge sums flowed into assets. The scale is simply remarkable. SuperNET’s ICO collected something like $4 million, most of it in NXT. Other assets have had no trouble collecting five- or six-figure sums. Some of it unfortunately ended up in mining assets which then mysteriously evaporated, but there was still a vast investment into some extremely promising projects.
Now, at last, some of those assets are starting to pay regular dividends. We’ll ignore the mining assets, but a quick survey shows there’s some respectable activity already.
Coinomat’s assets (coinomat and coinomat1) have been paying out regularly for months, of the order of 0.015 NXT per asset, or a current yield of 0.3% per week at a price of around 5 NXT per asset. Coinomat’s arbitrage asset, MMNXT, yields around 0.7% per week.
The newer arbitrage and trading asset Liquid looks set to yield around 2% for the month, and though it’s early days the wide-ranging trading company BTCOR has been posting stellar results. It paid 0.43 NXT per asset for April, and even at the current sell price of 15 NXT per asset that’s around 3% per month.
Audit company NXTinspect looks set to have a bright future, since its business model involves verifying the accounts, security and strategies of new assets – plus it’s got a new business incubator venture up its sleeve. It pays out in the assets it is paid by clients, as well as NXT, and dividends depend on the number and nature of clients in the last month or months (they’re not always monthly), but the last one was remarkably promising – something like 20%. Freebieservers has been paying out since April based on advertising revenues from its free servers, used by 100,000 gamers and growing fast. The last payout was 0.034 NXT per asset, or in the region of 1% per month if you buy at the current sell price, and they’re looking set to scale pretty well.
Then there are the gambling assets that are just coming online. NXTbubble, the Nxt version of a famous bitcoin game Bustabit, is recording huge volumes of play. The house edge is around 1%, but variance means the revenues probably won’t be regular each month; whilst the house always wins in the end, there are some high-rollers who are testing out the theory and they haven’t hit gamblers’ ruin just yet. After a long delay, neoDICE – based on the legendary bitcoin game SatoshiDICE – is being tested with a small bankroll on MainNet, and a fancy GUI is in the works. What will the effect be when it’s embedded in your SuperNET client, waiting for any spare moments to try your luck? And, of course, there’s SuperNET’s own suite of projects, including InstantDEX, which is now in testing.
The dividends are still a relative trickle given the overall size of the Nxt economy and its daily trade volume, but they are there and they are growing, along with the ever-increasing list of viable assets. It’s like a coiling spring.
It’s unclear to me quite what happens next, though I think the general direction of travel is obvious. Economics is an imprecise science, as any self-respecting economist should tell you. Broadly speaking, the money flowing out of NXT-the-currency has prompted investment in Nxt-the-platform. In the bear market, money hemhorraged out of NXT and into assets. Now, after several months of development, those well-capitalised businesses are firing up and generating a flow of value back to the assetholders in the form of dividends.
What investors then do with that NXT is up to them, but not all will sell it for fiat or other alts – especially if they believe the tide really has turned. Some will be held, some recirculated back into the Nxt economy, into new assets and new initiatives: a virtuous cycle.
Not all assets are equal – not just in their returns but in their approach. Some assets keep pace with NXT, others with fiat. Imagine a traditional ‘real-world’ business, or a mining asset: the NXT invested would be converted to fiat, so the capacity of the business to generate a return is broadly correlated with its initial fiat capitalisation. If a mining asset cashes out 1 million NXT to buy ASICs then its investment is fixed at the fiat value of its funds at that time. All other things being equal (which admittedly is unlikely in the fast-moving and murky world of mining, but that’s another story), if NXT rises in price against the mined coin, the NXT purchasing power of its revenues will decrease.
But other assets – like the arbitrage and gambling assets – mainly keep their funds as NXT. If NXT rises in price then they will keep pace. In fact, they’re likely to do even better, since rising prices lead to greater volumes traded.
The market will presumably judge these assets by their respective earning potentials – punishing some for being pinned to bitcoin or fiat, and rewarding others for keeping up with NXT. Against that, there is the complexity of what happens when a currency rises in price, and funds are sucked in from other areas – both assets and other crypto coins – as traders seek to get on board. And then there’s the issue of rising NXT prices (deflation) that encourages hoarding rather than spending, investment and economic activity. And the fact that the effects could all be dwarfed by the impact of the wall of Chinese money that seems to be pouring in anyway; this time around, the Chinese are wary of bitcoin but a number of alts have posted impressive rises in the last few weeks, up 50 to 100% already.
So it’s complicated, but there are certain incontestable facts: NXT has a fixed supply; the asset economy – now very nicely revving up and moving off the starting line – has no such cap. That means there is no cap on the revenues it can generate, and which it will need to pay out in NXT. Limited supply, unlimited demand. That seems to point in just one direction.
It’s a picture that will only become clear with hindsight. But hazy and fragmented though that picture may still currently be – even leaving aside the steady work being done in the background by the likes of DeBuNe and the NXT Foundation, bringing Nxt to PayExpo, conferences and dozens of businesses around the world – things are definitely looking up.
So don’t say it too loud just yet, but I’d argue it’s just possible we’ve turned the corner.
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Remember: the market can remain irrational longer than you can remain solvent; investments can fall as well as rise in value and past performance is no indication of future performance.