Is Million token the most gold-like digital gold?

Markets

Jul 27
Million Token

You may have noticed that I made a well-timed call on the new Million Token shortly before it rallied from $12 to over $200. And, you may have noticed it peaked near the exact price of $200 that I mentioned– but a peak does not make a top, and I am bullish for even more gains because I will argue this token may be the most gold-like digital gold of any other token or coin on the market.

Bitcoin is often called digital gold or digital gold 2.0. And, the arguments are well laid out by the Winklevoss twins. It is a compelling argument and seems to have, at least, been borne out partially. However, every analogy is flawed, and it is important to highlight the specific places where this argument falls flat. The first unsettling part of Bitcoin is that it costs real money to mine. Miners are thus incentivized to sell; this can put downward pressure on the price. Miners must pay their real bills in fiat. We can all agree that for price appreciation, i.e., pump, this is not good. But, even so, you can argue that physical gold also has miners that need to sell. The difference is that gold does not require miners to transact. Once gold is mined, it can sit around for long periods of time without incurring a cost. And, while shipping, it might be expensive: paper showing who owns it can be cheaply exchanged.

Most unsettling is that mining is tied to the exchange– and thus, one can argue that Bitcoin is not a store of value but rather an energy sink. Some might argue that is where the “value” comes from– but this is not true. The cost is the energy sink, and the value is the security, transactability, immutability, etc. The point is that even though so far, the coin has appreciated faster than the energy sink– it is an extrinsic risk to the value creation system. As for an example of the risks, traders can avoid the energy sink by using second layer solutions that don’t transact on the underlying chain but with fewer transactions to cover mining costs: miners might be forced to sell even more, or hash rate may drop– reducing security. Importantly, holders cannot avoid the sink.

The point I am making is not that Bitcoin is not a store of value– I believe it likely is. My point is that mining is undesirable from an environment and price appreciation factor. Thus, mining is an extrinsic risk. The crypto community is largely in agreement with this sentiment, so many in Bitcoin are trying to move to green energy, and Ethereum is trying to move to proof-of-stake.

Million Token is pre-mined. There are no miners. It was created with an absolutely fixed 1 million supply cap. Bitcoin, Ethereum, and Dogecoin are all inflationary: new supply is constantly coming into the market– although eventually, that will not be the case for Bitcoin as it has a hard cap. Doge was created to be hyper-inflationary. The inflation rate of Bitcoin is slightly under 2% or about that of gold at this particular time and will drop over time. Ethereum inflation is hard to predict but presumed to be very high– which is one reason they are going to proof-of-stake. Million Token has zero inflation. It is truly deflationary. Scarcity favors price appreciation given a constant demand.

More importantly, the other benefit to the fixed supply and the fact it runs on top of Ethereum is that there is no cost to holding it. Holders avoid the sink. With Bitcoin, over time, miners are forced to sell to provide utility to transact. Therefore one might argue that all Bitcoin holders “bear” the cost of the inflation for the coin’s utility. If new demand does not offset the “cost sink,” then the price should fall over time, all else equal. Traders or others who try to avoid the “cost sink” by using second-layer solutions may inadvertently put even more pressure on miners to sell because the miners have lower transaction fees to offset their costs. Mining cost thus represents an extrinsic risk which is frankly hard to calculate and model. Of course, Ethereum is also moving to proof-of-stake, which will make even the transacting of it green in the future.

One might argue that because the Million Token concept can be easily copied, it is no different from all the other undistinguished tokens. Yet, we know the fundamentals are superior for price appreciation than prior meme tokens like doge, which are highly inflationary. And, we know bitcoin can also be copied easily, and we have seen that it has appreciated. I argue that Million Token is different— not just because of superior fundamentals but also because Patrick Shyu has over one million YouTube followers. Even if I had the same idea, I could not replicate the value creation for this coin because I do not have a million YouTube subscribers. Think about that kind of reach for a moment, a million subscribers, many of whom are developers, ready to buy, promote, communicate, develop, and evangelize your token. And, that was just the start– the community has grown beyond that now.

As I shared at the beginning, all analogies have flaws. We cannot ignore the long history that gold has had a store of value nor universal recognition. One cannot also ignore the massive name recognition that Bitcoin likewise has today as a digital asset. Million Token thus might be more akin to an even rarer and more valuable asset, but likewise less well-known, like platinum or precious gems. It is clear the Million Token army constantly evangelizes it, and increase adoption is critical for maintaining momentum. Value is thus the combination of the rare fundamentals with the strong community backing.

And it is true, I believe, unlike Bitcoin might, it will never threaten the existing economic order, nor will it ever likely appreciate being a risk to the economic system– and that is perfect for rapid price appreciation. As for what kind of price appreciation is possible, if it can just reach 10%-15% of Dogecoin’s market cap, that yields a price target of $4,000. If Million token merely reaches the valuation of a newer token AXS, it would be priced at $2500. The potential gains given the current price around $70 are 35x to 60x, assuming it only reaches a fraction of its potential! Importantly, keep in mind Doge is a hyper-inflationary coin that was never meant to be a store-of-value.

Now, before you rush out and buy Million Token– let me be clear that even though I believe everything I have written here has logical veracity: I do currently hold a tangible amount of the token. And we cannot know the future with certainty. I frame this opportunity largely how Arthur Hayes frames the value proposition of Ethereum to the financial system. If Million Token only obtains 10% of a deflated Dogecoin market cap, then the return potential is 60x. If Million token can only obtain the value of another recent successful token AXS, then the return potential is 35x. When a trading opportunity comes along where the pessimistic return is so high, I consider that a rare opportunity.

On further consideration and in conclusion, Million token is probably not digital gold but may be an even more rare and valuable asset more akin to precious gems or platinum.

If you are interested to learn more, visit the official website for Million token at: milliontoken.org

Updates! Or was it a fools gold?

 

There have been too many developments for me to cover in this short space. However, it is clear some misrepresentations were made by the creator of the token– however, the core ‘fundamentals’ seem to be valid. A youtuber Coffeezilla called it a scam. While having no relationship to the project, I disagree with most of the claims.  The one claim that the 1 million backing wasn’t there too start was found out to be true though– though all tokens were backed by $1.  The bigger concern, to me, and not really addressed well is that because of the way TL used liquidity pools to sell out– it could have left less liquidity for other sellers.  This would likely have only impacted prices the first day or week but is a serious problem in my mind that wasn’t really addressed because it would disadvantage those sellers if the USDC wasn’t there to transact against!

On the other hand, the core propositions seem unchanged for later buyers, I bought in the second week. And, I am still holding a core position but have reduced my risk. The real question on my mind has been at what scale do network effects need to come into play to avoid a terminal decline on a scarcity token– and I don’t really know. It still reminds me of Bitcoin and when I look at the fundamentals, they seem better. And, yet without a use case or unique value proposition, I question what can drive future price appreciation or is price appreciation the use-case?  Clearly the “value” of the token drives from the scarcity and community or network effects. The community is upset due to misrepresentations.  The inventor did not seem to have a solid plan.  Maybe the network effect is not “stable” creator of value until it reaches a certain critical mass. It is a fascinating question though.  

Disclaimer: The author holds Million token. While enthusiastic, there is very little history for this token, and it is still very early days– thus the potential for catastrophic loss exists. The author is not an investment advisor, and therefore nothing here should construed as investment advice.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.

>