Volatility is seen by many as the villain of the crypto world, bringing images of losses and market crashes And sure, volatility is the main characteristic that allows for such events, but it is also the reason why bull runs can take place
You don't hear people complaining then, right? With that being said, volatility is a problem for people looking for alternatives to fiat currencies or who are not looking to trade but save money in crypto This is one of the reasons behind the popularity of stablecoins like Tether Today, I'm going to be explaining to you what rebasing is, and how it allows for coins to diminish volatility, as well as talk about a specific project with a whole new approach to it Oh boy, this is gonna be a big one for you altcoin lovers Let's get it
Welcome to BitBoy Crypto! My name is Ben Today, we're going to be talking about how elastic supply chain tokens work To do this, we'll first need to review the most basic of any type of trading In fact, to the most basic principle of any economic activity, supply and demand If you're not new to this channel, you probably know how much I use these three words
If you are new, get used to hearing them from now on Understanding this concept is fundamental for traders and projects who use elastic supply The concept is easy to understand The value of any asset or service has an impact on its supply and demand, with the opposite also being true Supply is the availability of the product— how much of it is being offered
Demand is an interest in acquiring it The law of supply and demand has different implications, but the main one is that from a price perspective, higher prices will result in less demand but more supply, as you are less likely to buy an expensive product, while more people will be likely to sell it Now, this also means that by altering the supply or the demand, the price of the asset will also change I see this in crypto all the time When investors hold on to their tokens, they are decreasing the supply of that token
This does not mean that the tokens are disappearing, just that they are not up for sale so interested parties can buy them This decrease in supply means the prices will go up, which is the reason why holding or HODLing is usually incentivized by projects As the price rises as a result of holding, those holders start getting tempted to sell and make gains And once most holders do sell too quickly, the price of the project will drop again So why does it drop? Because everyone is selling, so the supply is more than the demand for it
Easy, right? Well, if you still don't completely understand it, just remember what happened with toilet paper and condoms a few months ago People were worried that they wouldn't be able to wipe their butts in the next few weeks, so they rushed out to purchase as much as possible, and demand increased Thank you, mainstream media As the supply though was not able to grow as fast, the equilibrium was lost and prices skyrocketed, with some people selling rolls for hundreds of dollars It's not that toilet paper was suddenly doing a better job or was made of a softer type of material for your wiping comfort, it was just supply and demand
I guess that if you were in Japan or any country that uses a bidet, you didn't understand this example though I could have used the condoms example, but then virgins might not get it, which I suspect is many of you Let me know in the comments how many of you are wizards already Okay, enough economic theory for a video Let's now see why this is important when we talk about elastic supply tokens
These tokens are similar to stablecoins in the sense that they both aim to stay at a specific value Stablecoins do this by pegging their value to another asset, as in the case of Tether has a $1 backing for every USDT, which makes it maintain its value Elastic supply coins, on the other hand, do this by taking advantage of the law of supply and demand If the value of the coin is lower than the target, you can reduce the available supply to increase it If the coin's value is higher than the target, you can increase the available supply to reduce it
It's the same with toilet paper Once the supply increased and balanced the demand, the high prices dropped and reached a balance, as all things should be The important question now is how do these projects control supply? Well, they do this by using rebases While countries like the United States have big events that define their future, such as, I don't know, elections, but in the case of elastic supply projects, these defining moments are called rebases These are the moments when the token supply adjustment takes place
Now, these adjustments do not mean that the project’s creator will come and take your coins away That wouldn't be fair We have the IRS for that Token holders will still have the same amount of tokens, as the adjustment will not affect their tokens And honestly, I feel like this is where a lot of people get confused
Different types of elastic supply tokens will have a different approach to rebasing, with some of them, like RMPL, having their rebases at random times, while AMPL has them at a specific and regular time There is only one more thing though that we need to discuss for you to graduate from Elastic Supply Tokens University How does that rebasing effect handle supply and allow investors to make gains? Let's imagine an elastic supply token called BBC, which stands for BitBoy Coin of course This coin has a targeted value of $1, and you purchased 10 of them when it was at that value Now, the coin's value increases to $1
10, and a rebase takes place, which increases the supply by 10% to reduce the value of the coin This is where the magic happens After that 10% rebase, you no longer have 10 but 11 BBCs, each with a value of $110, for a total of $1210
That's until the law of supply and demand kicks in and reduces the price Duh! Also, I don't know if you knew, I was a graphic designer, but I drew a graphic demonstrating how this works Specifically made for you I never said I was any good In any case, as the graph clearly shows, the ending result is that you're happy
And we know graphs don't lie There are big projects already taking advantage of rebasing to control inflation in the value of their tokens, with the most popular being Ampleforth, the project who started the craze and one of the Top 100 coins according to CoinGecko RUMPL, YAM, and REB are some of the other coins benefiting from this new approach I've covered a lot of these projects in the past, so you should go and check them out if you're interested in the old ways of rebasing However, if you're interested in one of the latest projects using this concept, keep watching
So I'm now going to talk to you guys about xBTC And thank you to xBTC for supporting the channel I told you guys at the beginning that altcoin lovers would love this one, which is the case, but even supposed Bitcoin maximalists watching this will also be wanting to add this one to their portfolios You see, we've talked in the past about the dominance of Bitcoin in the crypto markets, how its movements have an impact on every other project Well, this is still the case most of the time
Anyone who denies that is a fool Fool of a Took That being said, we've seen an increasing decoupling as the result of the DeFi craze, which has resulted in altcoins moving in ways that are not proportional to Bitcoin activity Why is that important? Well, xBTC is a project that's created a token that uses a rebase to push its price towards Bitcoin dominance This means that if Bitcoin’s dominance goes down, token holders will see their holdings increase, which would pull the token’s value down Basically, this token is aiming to reward its holders as Bitcoin dominance decreases
The more altcoins decouple from BTC, the more XBTC holders will get The increase in value will not be the result of a token going up, but the number of tokens increasing Why did I say altcoin investors would love this? Well, because as the market grows and more altcoins keep showing potential, Bitcoin’s dominance in the markets will decrease, and the value of holding XBTC will go up You're basically betting on all other crypto assets to beat Bitcoin So, why would Bitcoin investors love this coin? Because it's a great option for them to hedge against Bitcoin
BTC’s dominance goes down for any reason, including a value loss, this coin will go up as a direct result Now, it seems like a good moment to thank xBTC for sponsoring this video, allowing me to talk about rebasing, which might be the next big thing in the DeFi space If you have not already heard about this project, I don't blame you It just launched back on September 24, the day when it became available on Uniswap and Mooniswap Liquidity providers on Mooniswap earned 100K almost immediately upon the initial offering
The project also has the support of major companies, like 1Inch, Tellor, and TradeDog Honestly, guys, I haven't seen anything like this one in the past It's very unique I'm very excited to see what this can do for the crypto ecosystem as a whole I got nothing against Bitcoin
It's a little boring, but I'm sure it will keep growing in the future Keep in mind that this coin doesn't expect Bitcoin to lose value, but its dominance on the market to drop Not the same thing You can have Bitcoin and experience gains with both coins if altcoins as a whole do better than Bitcoin Be blessed
BitBoy out
