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Friday, January 2, 2015

PayCoin Price Update: Buy High, Sell Low?

I've been thinking about this quite a bit, and frankly I'm quite perplexed with the prices of PayCoin. There are a lot of people with a vested interest in seeing Bitcoin continue to reign supreme, so obviously an upstart like PayCoin could be seen as a real threat. Launching with a lot of fanfare and then surpassing Litecoin in market cap in just a few weeks is definitely an achievement, and it almost certainly woke up the sleeping giants over in Bitcoin land. Let me just throw this scenario out there:

At present, there are in total 12,375,932 XPY. Of those, only a small chunk is really available for trading -- I talked about this in the previous post, but to recap: 6,885,169 XPY is in the Prime Controllers, and there's another 4,689,646 XPY in the next ten or so "rich list" addresses that's not being traded as far as I can tell. Subtract that from the total coin supply and we end up with... 801,117 XPY basically "in the wild". I'm not sure where coins placed in HashStakers end up going, but some of that 800K might be in HashStakers (unless it's in some of the other addresses already counted), further limiting supply.

Here's where it gets a bit odd. Looking just at the Cryptsy volume of the past two weeks (basically since they first listed XPY), the total amount of XPY traded over there is 660,760 XPY. Cryptsy is basically accounting for 60% of the total PayCoin volume right now, so we could say the total amount of PayCoin traded over that time might be more like 1.1 million XPY. How is it that we're seeing 800K coins trading around and dropping the price from a high of $22 or so down to the current $3-$4?

And here's where you can don your tin foil hat. I'm not a huge conspiracy theory type of guy, but when you look at the trading and the price progression, basically the only way this is happening is if people are buying PayCoin and selling at a loss, and then the new buyers also sell at a loss, and so on. GAW talked about burning through a lot of money trying to keep the price at $20 for a bit, but now that it's down to $4 it would be relatively easy to start buying up coins. If there are only 800K or so XPY that aren't in direct control of GAW and their biggest backers, a $3.2 million buy wall at $4 would absolutely prevent any further slippage. That should be relative peanuts to GAW, but they're not playing right now it seems.

It's possible then that a group of XPY naysayers (i.e. BTC "fanboys" or perhaps even a government backed move) could spend a relatively small amount of BTC or money to essentially drive the price of XPY down. You buy at $12 and then dump it all at once to drive the price down to $8. Then you buy again at $10 and dump it all at once to drop the price to $6. Keep on doing that and no one else is willing to risk buying XPY, leaving the price essentially in free fall. And that's at least one possibility for how we're down to $4 and lower with only a small amount of XPY being publicly traded. And I'm sure the powers behind this move are tickled pink to see XPY back below LTC in terms of market cap.

At some point, GAW or someone else that believes heavily in PayCoin will step in and buy these coins and then refuse to sell them at anything less than $20. Couple that with PayBase getting additional features rolling (which have always been planned for the February-April time frame as far as I can recall) and we should eventually see a nice comeback. In other words, if you do happen to have some spare BTC floating around, I don't know exactly how low the price will go, but I wouldn't expect it to break below $2. But of course, I'm pretty shocked to see it hitting even $3 so take that as you will.

My advice remains to hold your XPY, preferably for at least four to six months if not longer. We're so early in the game right now that about the only thing that could fully derail this train is for GAW to fold their hand and declare PayCoin a failure. Given the apparently rather large investment into the coin algorithm, hardware, PayBase, etc. I really don't think that will happen. If it does, it's a huge blow for cryptocurrency in general and at that point even Bitcoin supporters should be wondering about the future viability of their coin. That's something that would definitely please more than a few governments, but the cryptocurrency community should be doing their best to avoid that scenario.

Ironically, for all the doom and gloom let me also throw this out there. Let's say you bought something like $10,000 worth of Zen Hashlets back in the day (call it 500 MH). The proceeds from mining for the first two months after Zen Hashlets appeared would have paid for a large chunk of the initial investment, so really you'd only be about $4000 in the red. The several weeks of HashPoint Pool mining would have resulted in the accrual of at least 500,000 HashPoints, which in turn would have given you 1250 XPY. Even at the current valuation that would be more than enough to account for the remaining investment... but you still would be way ahead!

You see, if you weren't an idiot, those 500 Zen Hashlets would now be 500 HashStakers. You'd have 750 XPY left over and you'd be staking another 4.86 XPY every day for 180 days. All told then you'd end up with at least 2100 XPY at the end of six months. Alternatively, if you bought Hashlet Primes at $50 each, $10,000 would give you 200 MH and a much smaller initial return, but you'd now have 200 HashStaker Primes ("forever") with an extra 200 XPY in them. It's a longer-term play, but for Zen Hashlet and Prime, things are going quite well IMO.

Or in other words, as bad as the current price might seem at first glance, mining with GAW starting in September still gives you a very definitive ROI. So when GAW says to not get too hung up on the price right now because things will get better, I'm willing to sit back and wait. And it's not like there's a lot I can do with the XPY I have in HashStakers anyway, as it's locked up for the next 170 or so days regardless. If you want to play the waiting game, then, wait five months and see what happens. If PayCoin is still struggling, sell all you can over the five months and get out just before the first round of HashStakers finishes up and probably a few million XPY gets released back into the wild. Or don't in the hope of being able to say, "I told you so" to anyone that cares to listen.

PS: Fun fact: if you bought and kept your Hashlet Primes, they're now valued at around $75, a 50% increase from the initial price. I traded all of my Primes for HashStaker Primes... except for one, which I kept for nostalgia's sake. The income (including double dipping) is currently averaging out to something like 0.00025 BTC per MH, daily, after maintenance fees. That's still 7-8 cents daily, which means you can still break even given enough time. I wonder what the guy still holding on to 1091 Hashlet Primes thinks of his decision?

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