Pop-quiz: One coin has a max supply of 1 million, while its competitor has a max supply of 10 million. Which is the better investment?

All things being equal, the rarer one. 

Pop-quiz: One coin increases its supply by 10% every year, while its competitor has a forever fixed supply. Which is the better investment?

All things being equal, the one that’s not inflationary.

Pop-quiz: One coin is predominantly owned by a single whale who sells a large chunk every week, while the other is more democratic in its ownership. Which is the better investment?

All things being equal, the one without the dumping owner.

The answers above are common sense, often repeated, and flawed. Because all things are never, ever equal in the world of crypto!

Forget about supply for a moment

There's another factor that influences the price of a cryptocurrency far more than its supply economics ("tokenomics"). And that factor is its demand in the marketplace.

Take a coin with the worst tokenomics you can imagine. Let's say every year its supply doubles and one person owns 90% of it. Awful, right? But now imagine that that token was created by Elon Musk. Voila, tokenomics don't matter anymore, because while the supply will double, the demand will probably 100x. That's the reason why so many cryptocurrencies with awful tokenomics win year after year: because for whatever reason (marketing, technology, adoption, some combination), they've driven incredible demand.

The reason why everyone talks so much about tokenomics is because the numbers are readily available and easily digested. In contrast, forecasting demand takes hard work, technical knowledge, and imagination, which is practically another job. For example, if you’re thinking about investing in an exchange’s coin, it's easy to note that they're deflationary, but hard to research their competition and think through emerging threats like decentralized exchanges.

The point of this article is not to minimize tokenomics, it's to encourage you to think beyond them. I've seen too many people skip over quality projects because they had read somewhere that its tokenomics were bad, and just as often I've seen too many people invest in dicey projects because it had ponzi-like tokenomics. That's a mistake.

Remember: when you invest in cryptocurrency, you're betting on extreme future demand. Unlike the stock market, you're not betting on a company's revenues going up by 10% during the year, you're betting that some day crypto will seep into every part of our lives. If that day comes, which is not guaranteed, then any supply question marks will quickly be paved over.

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