I think I am Trading Wrong

So I’ve really enjoyed what ICP could become and have moved some of my meager investments over to purchasing ICP Tokens for Stake rewards… however I can’t help but to wonder where the price per token will bottom out.

What are Y 'all’s thoughts on the token cost and if investor confidence is simply not established yet, or if people are intentionally driving the token price down ?

What would be the impact of negative return for the node operators in the event the cost of creating the cycles is above what the cost of the token is? Simply have them stop providing cycles till demand picks back up while the current supply dwindles thus raising the price ?

Wonder if their is an active list to track how many of the total supply are in rotation now, and of those how many are actively being bought/traded. We can see the Trade history on the mainnet chain but that doesn’t really show the broader aspects.

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Most cryptocurrencies have tanked during the last few weeks so ICP isn’t alone in losing value. What I don’t get is why ICP tokens are an untethered cryptocurrency and not linked to a stable monetary currency. If I purchased a token for $300 and the price then drops to $100 before it is used then I will presumably only get the current token value converted to cycles. This makes predicting the cost of switching over to IC web services unpredictable compared to Azure or AWS. Releasing ICP tokens as an untethered cryptocurrency no doubt attracted seed investors, but now the cost of using the new technology is indeterminate.

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Cycles are tethered to a stable currency (i.e. IMF’s SDR, which is a basket of fiat currencies). So even if ICP drops, the conversion rate of ICP to cycles will be automatically adjusted (every 15 minutes or so, I think) such that 1 trillion cycles ~ 1 SDR.

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not sure I understand, I think Tris was saying that if 1 ICP was bought at $300 and is equal to 1 Trillion Cycles, but as a crypto token the price drops and the 300-1t is now 100-1t, you cannot take that 1 Trillion Cycles and convert back to its token… therefore the cost is $200 between the high and low.

even with a reserve monetary fund of foreign exchanges, that would only help float the currency temporarily…least to my limited understanding…until trading can resume and stabilize itself. I guess they could use those funds to buy their own tokens to drive the price up, but wouldn’t they just reduce the number of available tokens to trade with …then slowly trickle in more tokens later?

Thanks Zelcova for explaining what I meant. To provide another example, if two people purchased tokens using a stable currency at different times for different prices, but then each used a token during the same 15-minute time slot presumably they’d both get the same number of cycles regardless of the purchase price of each token? The only way that the price of ICP web services would be determinate would be if the conversion algorithm knew how much each token was purchased for (in stable currency) and factored that into the number of cycles granted.

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Let’s say you know that your app needs exactly 1 trillion cycles to run every day.

Day 1: Price of ICP is 100 SDR. You buy 0.01 ICP at a total cost of 1 SDR and convert 0.01 ICP to 1 T cycles to fund your app.

Day 2: Price of ICP doubles to 200 SDR. You buy 0.005 ICP at a total cost of 1 SDR and convert 0.005 ICP to 1 T cycles.

Day 3: Price of ICP drops to 50 SDR. You buy 0.02 ICP at a total cost of 1 SDR and convert 0.02 ICP to 1 T cycles.

But the catch is that you need to buy ICP right before you plan on converting it to a known quantity of cycles, so it requires continuously purchasing new ICP to fund your app. Whereas you’re thinking of a use case where someone wants to pre-purchase ICP in bulk to later convert to an unknown quantity of cycles. Is that accurate?

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Exactly, cost per cycle is only determinate if the token is converted to cycles at the instant of token purchase. Issues:

  1. Except for very simple web apps the number of cycles required per day depends on unpredictable factors such as visitor activity on the site, therefore it may not be possible to predict cycles accurately. It is reasonable to assume that web app maintainers will not want to run out of cycles or have to constantly monitor their token balance and will pre-purchase ICP in bulk.
  2. Token price fluctuations can occur very rapidly so the 15-minute conversion algorithm update frequency could result in a conversion that does not accurately reflect the value of the token at time of purchase.
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Web app maintainers will buy CYCLES (icp and convert to cycles right away) for the storage. Nobody is storing icp for the transfer to cycles later on. Canisters can store/hold cycles.

Levi, thanks for mentioning that. Storing cycles not tokens makes sense. I still don’t get why ICP was released as an untethered cryptocurrency since it’s main purpose is supposed to be a voting stake not speculation. I’m guessing that was done to attract seed investors and raise funds.

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ICP was released as an untethered token to incentivize ICP holders, who (can) govern the IC, to maximize the long-term success of the IC.

It’s impossible for (tethered) cycles to exist without (untethered) ICP, because the ICP token is used to define what a cycle is in the first place!

The only way to make a stablecoin without ICP is to do what all the other stablecoins are doing: have some big bank where you send physical USD and receive tokens back. But this is a centralised scheme that can be shut down by regulators. Cycles can’t be shut down, because they’re wholly defined via NNS voting and nothing else.

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Ayjayem, and this is part of the problem with this project - get some random(uneducated) people buy the artificial hype to get the project holders/investors some profit. Sucking up intentionally peoples money ain’t going to end up very well. Who will even won’t to stake with Dfinity, and moreover why would they do that when cannot even get their investment back, let alone secure a profit. One will say we are developing the new world communication and services, could be but still have to make a living.

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I suppose the holders of all cryptocurrencies have an incentive to create hype to drive up the prices of their holdings, right?

A key difference with ICP is that holders can stake for a defined time period, during which they cannot sell their ICP. Doing this and participating in network governance entitles stakers to ICP rewards, proportional to how long they’ve staked for. This incentivizes stakers to promote the long-term success of the network: stakers want ICP to be worth a lot in the future, when they’ll be able to remove their staked ICP principal. Creating unjustified hype and destroying trust in the immediate term only harms the project and the long-term value of ICP, so stakers are disincentivized from doing this.

Levi, All,
Here’s another consideration…
Suppose you’re an Enterprise and keen to divert centralised cloud spend (fattening the balance sheet of Amazon, Microsoft, Azure etc) to buy ICPs (as intangible assets on your own balance sheet)… Commercially very attractive but impossible now to determine ROI given the important comments raised here…
Another angle, hopefully useful.
Great thread btw - need to crack this one to win the war.
Cheers from the UK
Justin

…. Did you read this thread? Do you know what cycles are ?

Enterprise could simply buy ICP and convert immediately to cycles for a predictable fiat cost of storage/compute though, no? This post sums it up well:

Always able to buy 1T cycles for 1 SDR, no matter the price of ICP, so should be fairly straightforward to calculate ROI, given known compute/storage costs (in terms of cycles) on the IC.

it was your comment that put me on that track, albeit wrong - “Web app maintainers will buy CYCLES (icp and convert to cycles right away) for the storage. Nobody is storing icp for the transfer to cycles later on. Canisters can store/hold cycles.”

Well, it seems you know what you are talking about and wonder why misleading here. So let’s clarify - not the(seed) holders created the hype, you are right here. You are right too about the harm from heavily dumping the price, however it will really only harm the one lately joining the club. Because the early holders got in at what rate?, must be a single digit I guess, plus the airdrop, so let’s not worry about them and just to note that they are not really happy the way they are treated lately. Back on the hype, how it happened and who is behind it if not the holders? - hm, not that hard to answer, right. Also, what stakers want is one thing, and seems to be diametrically the opposite of what developers want, as who wants to pay more for running their projects?! Eventually it will come down to how much development will be built and this is the real deal. Up to date, a lot of people can’t wait to get rid of their holdings and dearly regret being part of the project, and looking the performance I cannot blame them. The idea is great, no word about it, just the execution is limping. One would think that 5 years and 200 top developers would come up better on the crypto grid - more than half of the world is running on Win os, where the Dfinity sdk cannot even be installed, how about an own browser, hard wallet, less confusion, bugs and ui, people can freely deal with. Still, putting all that together and getting that far is a great achievement, hands down and congrats.