This article is my own analysis, and judgment, of what I have observed happening with Reddcoin in the recent past, and may not be completely accurate. However, I have spent quite a bit of time trading this currency, and I watch the order books every day.
If you are reading this, you are likely interested in Reddcoin. Some of you are like me, and invested a small amount in the IPO, and have slowly bought RDD since. Others may have bought in later, or may not have decided whether you should buy RDD or not. I’m not going to attempt to convince anyone to buy or sell RDD, but rather to pay attention to what is going on.
Reddcoin is based on a great idea, and has a team of great developers behind it. Redd API, Reddcoin Broadcast, the gorgeous new website, the updates and corrections to the core, the tip bots, the tipping campaigns, the Reddcoin rewards program, and all of the other features, systems, and tools that are being developed by the core development team, and members of the community that are working with them, have been implemented quickly and effectively. Reddcoin still has a long way to go toward reaching it’s potential, and becoming “The Social Currency”, but it is on the right path.
However, many people have been concerned by the fact that Reddcoin has been hugging the 2-4 satoshi mark for quite some time now. I’ve noticed many worried posts on the subreddit, and a trepidation across the community. The lack of market cap growth following increased popularity has been perplexing to most, and it is hard to tie all of the factors together. Fortunately, when pulled apart, and listed, it becomes a bit easier to see.
The IPO Investors
A large portion of the IPO investors are instantly selling part, or all, of the coins each day. This is likely for multiple reasons. Since the IPO, the price of Bitcoin has dropped significantly, and some investors may be desperate for funds. Others may have invested in the IPO on a whim, and later lost interest. Others still may have used the low prices to collect all the RDD they care to hold on to, preferring to have them on hand rather than waiting, and are now allowing the IPO funds to be dispersed.
All altcoins are influenced by Bitcoin at this point. It is a sad, but true, fact that Bitcoin is the gatekeeper. When it loses value, the other coins do not generally gain vs Bitcoin, but rather lose as panic sets in, and many investors exchange altcoins for Bitcoin, and then Bitcoin for fiat.
A few day traders, or semi-day traders, including myself, have spotted a “whale” (trader with a very large amount of funds) on Cryptsy that is manipulating the price of Reddcoin. I have watched someone, or a group of people, cancel 10+ bitcoins from a buy wall of a nearly 20 bitcoin wall, then sell enough Reddcoin to cancel the remaining coins in it, followed by putting a new sell wall of 10+ bitcoins worth of Reddcoin in it’s place, and move in a new, buy wall at 1 satoshi lower.
The reason they do this is because the lower the price of Reddcoin, the larger the % gain between the buy and sell walls. Using a carefully planned strategy, a smart trader can gain control of a large portion of the market. As long as the IPO investors are selling at a high enough rate, this strategy is very easy to accomplish with enough funds. I expect that once the IPO distributions are finished, this whale (or group of whales) will allow the price to start rising freely, or even pump it up themselves.
The New Reddcoin Users Are Misleading
This is a two part issue.
First – Many of the new members of the Reddcoin community are not actually investing any funds into Reddcoin. They are introduced to Reddcoin because they were tipped, and are only interested in tipping, or being tipped. These users do add value, but not immediately. They will bring in value from other sources as the community grows, by making the market attractive to those who are actually willing to invest in Reddcoin. However, they will have no effect on Reddcoin’s worth today, or may even lower the price by selling the coins they were tipped.
Second – The number of subscribers on the subreddit, followers on Twitter, etc. may be inaccurate. While I do not think that the developers themselves are buying bots, or buying subscribers, someone may be. It could possibly be the whale mentioned earlier, or some random user that wants to see Reddcoin grow. However it is happening, it seems as if the numbers are not accurate. The % of subscribers that are on the subreddit at any given time is significantly lower than other currencies, and the rate at which new users subscribe seems to generally increase at a very linear rate. This is strange, as usually a community will usually grow in spurts, and during the periods that it grows at a constant rate, it also has a higher than average rate of involvement by the new users.
So, after going through the potential causes of the low price of Reddcoin, at least from what I can see, I am optimistic for the future. Honestly, the price of Reddcoin today is directly in line with the price that the IPO investors paid for their coins. With 168.8 Bitcoin invested, and 5.2 billion coins to be distributed, the average cost of each Reddcoin in the IPO was 3.24 satoshis. That means that anyone buying Reddcoin today at 3 or 4 satoshis is getting in at around the same price as the original IPO investors, which may be part of the reason for it sticking at this point.
I am unsure about what will happen in the next few weeks, but I do expect the price to start rising at the end of the IPO distribution. As a small IPO investor myself (less than a BTC invested), I know that the distributions are going forward at the correct rate, and should finish on time. At that point, when the inflation of 60 million coins per day ends, it should be easier to get a solid grasp on how this currency will work out in the near future.
However, I do have one request for the Reddcoin dev team. More specifically, I have a request for whomever is in charge of the subreddit. Please, make the stats for the Reddcoin subreddit publicly viewable. The other major digital currencies have their stats available to the public, and Reddcoin needs to do the same. There was a post on the subreddit mentioning it recently, and I have heard others complain before. Without this kind of transparency, future investors may be hesitant to adopt Reddcoin.