Will Dash Rise Above and Break $100?

The Dash Masternode Site, with how-tos on how to set up a masternode and other related topics.

Yesterday, I wrote Could Dash Become the Greatest Cryptocurrency and wanted to expand on some of the numbers behind how Dash is currently trading and how I expect it to trade into the future.

Misunderstanding the Trading Numbers

As a trader, I am often surprised at what numbers most people look at and what numbers people don't evaluate. Let's look at this in the case of Dash. Suppose that we talk to a person who claims that Dash doesn't have enough volume in trading because it's market capitalization is about $100 million, but the trading amount is about $3 million, or only 3% of its market capitalization.

This is wrong.

Dash requires that each masternode holds 1000 Dash, and right now there are approximately 4000 masternodes. Let's look at the numbers of this:

1000 Dash x 4000 Masternodes = 4,000,000 Dash
4,000,000 x $14 = $56,000,000
$56,000,000 / $100,000,000 = 56%
$3,000,000 / $44,000,000 = 6.8%

In other words, in this example, about 7% of the total supply of Dash is being traded, if we assume the total market capitalization is $100 million and the volume for the day is $3 million. We must exclude the Dash held by masternodes in our calculation, as these Dash must be held. Comparing this to some popular stocks and commodities that I trade, this is moderate in comparison.

Finally, if other people expect Dash to rise in price, they may realize that setting up a masternode right now is cheap, and thus reduce the supply further. People forget that the return on a masternode will pay even more if the price of Dash rises higher; masternodes have an inherent interest in a higher price and a 51% attack is a very low probability when we consider that Dash requires 1000 Dash per masternode. Someone would have to drop a lot of money to destroy the network. From a purely economic standpoint, it makes more sense to strengthen the network than it does to hurt it.

Evan and his team really understand game theory; the way Dash is built reflects a strong understanding of how economics works.

Update: Let's look at the numbers as of right now:

As it currently stands from CMC, in the last day Dash has experienced volume of $2.9 million with a price of about $13.50. That means that 214,814 Dash exchanged hands. Considering that Dash's full supply is 6.7 million at this current time, that's only 3% of Dash exchanging hands. This is is only true until you consider that the masternodes are holding on to 1000 Dash each and that there are over 4000 of them. Suddenly, 4 million Dash are out of the supply. So what happens when we look at 214,814 out of the remaining 2,677,064 supply? That means that out of that available supply, 8% exchanged hands. Remember that this is data from CMC and people like myself have purchased large sums of Dash at other exchanges not currently listed and these sites have buy orders in them as well.

Unfortunately, we don't have the full volume figure, but I predict that about 10-12% of Dash have exchanged hands this last day. Compare that to currencies, commodities and your favorite stocks and Dash looks like what we'd expect. If we compare Dash to bitcoin as far as volume as a percent of available supply, the numbers are much different: according to CMC, 87,644 bitcoins exchanged hands out of a supply of over 15.8 million - only 0.5% of bitcoins.

I cannot stress this enough for people who are new to Dash: you cannot look at the total supply of Dash because of the effects of masternodes. This is also true when traders evaluate Dash.

The Supply Might Be Lower Than We Think

I made this mistake too - many of us have stated incorrectly that the total supply of Dash will be 22 million. However, this is incorrect. Amanda clarifies this perfectly in this video that the supply can change relative to the block reward, which is dynamic. At current estimates, the maximum supply of Dash will be 18-19 million. Let's keep in mind that most masternodes (if not all) have an inherent interest in Dash doing well, so there's a strong economic incentive to preventing the supply from bloating relative to the hash power.

Anyone who's concerned about, "What happens if Dash rises to a price so high that the measuring unit feels too high like $2000 per Dash," can be addressed by using a lower measuring unit like I proposed in my previous post of calling one-thousandth of a Dash a Dite. This is very important because entrepreneurs know the value of selling products in whole numbers, without too much decimals like 0.0019 (too confusing for the average consumer). If one Dash equaled $2000, then one Dite would be $2. Unlike bitcoin, I suspect that the Dash community would jump on this without all the fighting; this has been one of bitcoin's biggest mistakes, as the high price feels intimidating and it should have moved to a smaller measuring unit a long time ago (along with using currency terms that don't sound nerdy - a Satoshi, really?).

Repeat After Me: Infrastructure

One big misconception that I'm seeing a lot of is that Dash will only go mainstream if enough speculators join, or another major cryptocurrency makes a mistake. Heck no. Do you want to win because everyone else sucks? That's the worst way to win.

One of Dash's biggest wins will be infrastructure. I can do peer-to-peer lending with bitcoin. I can earn interest in savings with bitcoin. I can invest in stocks with bitcoin. That's infrastructure; it increases use because we can do many activities with bitcoin. Dash can do the same as all of those I just listed; as that begins to increase, the use of Dash will increase and the price will rise. Dash also makes a great settlement currency due to its speed; just as an example of how fast Dash is, Dash can be used at vending machines.

Will OKCoin and Coinbase Add Dash?

Two of the most popular exchanges do not allow Dash trading at the time of this writing. Stop and consider this fact: if two of the most popular trading sites don't allow Dash at this time and approximately 7% of Dash is being traded daily, what would happen if both allowed Dash? I would agree with any reader who might respond, "Well there's no guarantees it would double or triple, or even rise." Exactly; but since two big exchanges don't trade it currently, we don't know what the volume would be if they allowed it. This is also true with other cryptocurrencies.

I would almost bet that most of the masternode owners realize that if both of these exchanges add Dash, then the demand will rise even higher. How could a masternode help make the case for Dash on both of these platforms? Outside of direct influence, one way is to draw attention to Dash - and higher prices are one way. Another way is to continue voting on ideas that expand the use of Dash - ideas such as fiat gateways, easy swapping for businesses to use, and savings and investment ideas - such as allow investors to buy shares of a company that has several masternodes (to my knowledge, this hasn't been done yet).

As more interest is generated, customers will do the work for Dash, pressing OKCoin and Coinbase to add it. My own recommendation for companies would be lead and not follow, but most businesses do not think this way, which is why they struggle to attract long term interest. This is a nice way of writing, if you don't meet what your customers want, they'll lose interest. OKCoin and Coinbase are only the major exchanges because competition isn't as fierce as they think it is; this day may be coming to an end faster than they think.

The impact of a bigger fiat gateway exchange adding Dash will be huge. As we've already seen, a lot of Dash relative to its available supply is being traded. If more trading comes on line, it becomes a lot more liquid.

Eastern Interest Is Rising

I watch securities mostly during Eastern hours, such as Hong Kong, China, India, etc. People may not realize, but the East now has more millionaires than the West, so it will influence securities more than the West and this can be seen in the price of silver - many of the increases in the price of silver have been during Shanghai trading hours.

I'm seeing a similar pattern with Dash - the West is selling, the East is buying. Right now, what the East buys, wins. Bitcoin had to win with the East and it did. Dash is the same. I strongly suspect that the popularity of Dash rising in the East is because many people in the East grasp why it's such a good idea from an economic standpoint. In addition, ZeroHedge likes to assert that bitcoin is popular because of capital flight; Dash makes a better cryptocurrency for capital flight than bitcoin, assuming their assertion of why bitcoin is popular in the East is true (I think ZH is wrong - capital flight is not a driving interest in bitcoin for the East; gold is better).

Still, there are numerous cryptos available to trade and Dash offers one opportunity. As long as Dash stays competitive, it will do well and when it's tested - by a hacker - it must be able to survive. Dash hasn't risen to a price high enough to justify a major hack (relative to bitcoin), so this is something that the world is watching.

And Now, The Technicals

Traders know that all eyes are on $15. This is where Dash experiences resistance. We'll see how Dash trades near this number. Keep in mind that many securities or futures will often hit a value and fall before breaking out - nothing rises or falls in a straight line. For an example, sugar tested $15 at least four times before punching through it. Dash may test it multiple times and rise eventually above it, or it may test it and fail. What we're seeing is that $15 is when a lot of Dash holders want to sell; any strong rise above that number may make some of these sellers re-think that there's a better price.

What does the future hold for Dash and other cryptos? No one knows for sure, which makes this entire industry a lot of fun.

Note: some of our posts appear on our blog FinTekNeeks.