As we round out 2022, it’s important to reflect on how terrible a year it’s been for crypto thus far.Many projects have failed, eroding investors’ faith in riskier projects.Moreover, the bankruptcy of BlockFi and FTX has alarmed investors who previously viewed regulated exchanges as safe.Consequently, the fallout from these bankruptcies, combined with increasingly bearish sentiment in the market, could create a downward spiral in which many other projects and exchanges collapse in the near future.
With that in mind, investors may want to consider cryptos to sell in this environment.
Among the key cryptos to sell, for those worried about a loss of faith and liquidity in this sector, are tokens backed by centralized crypto exchanges and projects prone to a death spiral, as we’ve seen with Terra Luna (LUNC-USD).
Additionally, investors will notice that this list contains cryptocurrencies that are owned at large by a risky exchange.Exchanges have massive stakes in many top projects, and these cryptos will likely face significant devaluation once exchanges are forced to sell them to raise liquidity, if mass withdrawals happen.
Therefore, investors should avoid the following three cryptos to sell, at least until the market reverses its current downtrend.
|TRX-USD||Tron||$0.054|
|USDD-USD||USDD||$0.976|
|GMT-USD||STEPN||$0.403|
Tron (TRX-USD) & USDD (USDD-USD)
Tron (TRX-USD) could be heading into a death spiral in a similar way as as its algorithmic stablecoin project cousin Terra (LUNA).Interestingly, Tron’s ecosystem mirrors that of Terra’s, with USDD (USDD-USD) being the algorithmic stablecoin backed 1:1 by TRX.However, like Terra’s UST stable coin, USDD is a stable coin I view as far from stable.That’s because this token has already lost its peg against the U.S.
dollar multiple times, now trading below 98 cents apiece.
Although Tron claims its stablecoin is overcollateralized, it’s what’s backing this token that matters.Like other algorithmic stable coins, USDD is backed by digital assets.
Thus, should large fluctuations take place in the crypto market, what seems like overcollateralization today could actually turn out to be under-collateralization in the future.
The project’s website states that the stablecoin is overcollateralized by a margin of more than 200%.That sounds good to many investors.However, this claim appears to be misleading, since USDD’s most significant collateral comes from TRX’s burn contract, worth $725.3 million.I wouldn’t consider that collateral, since it’s not accessible.Meanwhile, the accessible assets backing this stable coin are valued around $732.4 million.
An additional $101.2 million in TRX backs the USDD stable coin.So, in total, it appears that the aggregate numbers supporting this token should provide stability.
But backing out TRX (could be worthless in a death spiral scenario) and the TRX burn contract, we get to a situation where things may be less-desirable for this project than many think right now.
Doing the math and discounting Tron-related assets, we’re looking at $631.4 million [Bitcoin (BTC-USD) + USD Coin (USDC-USD)].That’s a stablecoin supported by 87% of verified and solid collateral.
Oh, and there’s also a peg stability module that lets you swap USDD 1:1 with other stablecoins held by Tron.That means the only collateral that’s truly “safe” is the $238.6 million of BTC.
Sell both while you can.
STEPN (GMT-USD)
STEPN is a blockchain-based game with an admirable goal – to get people moving.By rewarding users for activity, STEPN is a project that’s garnered tremendous interest, particularly among exercise enthusiasts.
This project has two tokens in its ecosystem, Green Metaverse and Green Satoshi Token (GMT-USD, GST-USD).GST is the utility token used to reward people for simply moving.
The Green Metaverse token (GMT) is the governance token providing investors with the ability to vote on protocol updates and benefit from the rise in value of this ecosystem over all.
How this works is users who wish to earn rewards from moving must first buy non-fungible tokens (or NFTs) to earn GST.
I think that’s a big red flag.Users rewards, paid out in GST, also sound great.But this is a token that’s crashed to 2 cents from $9 at its peak, meaning users are paid only a fraction of what they used to.The governance token also looks expensive at a $240 million market cap, which puts both these tokens squarely on my list of top cryptos to sell.
Finally, the project itself is based on Solana (SOL-USD).Solana’s core SOL token is down 96.4% from its all-time high, as its network overall appears to be unstable.
Thus, GMT is looking at a significant downside in the coming months as STEPN’s valuation should be much lower.It had profits of only $10.36 million in Q3.That’s down a remarkable 90% from Q2.
On Low-Capitalization and Low-Volume Cryptocurrencies:
InvestorPlace does not regularly publish commentary about cryptocurrencies that have a market capitalization less than $100 million or trade with volume less than $100,000 each day.That’s because these “penny cryptos” are frequently the playground for scam artists and market manipulators.When we do publish commentary on a low-volume crypto that may be affected by our commentary, we ask that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: How to Avoid Popular Cryptocurrency Scams
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines..
