There are 7 main reasons why Strong coin has been constantly plummeting since November ’21 and they are all interrelated. I don’t see this downward trend breaking unless the StrongBlock team addresses the last 2 of these.
So let’s take a look at the main factors driving Strong coin’s cascade. I will list them here and then dive into each of them.
ok, you with me?
Main reasons why Strong Coin is crashing
- The macro environment is causing all assets to drop
- Strong nodes have a long incubation period. With the market plunging it is riskier to invest in nodes.
- Many people now think that Strong Coin is a scam. This discourages new buyers.
- STRNGR whose supply is flexible replaced STRONG whose supply was not. This pissed their community off.
- Competing offers diverted some investor funds away.
- StrongBlock is not generating any revenue.
- StrongBlock is unresponsive causing bad PR.
Let me walk you through each of these.
I am going to assume you know what this token does and how it works. If not please read my in-depth explanation of Strong Coin.
1/7. Broader macro environment is depressing all prices
In October 2021 the inflation rate in the US exceeded 5%, the highest rate in more than 20 years. With the US and other economies having printed massive amounts of money during the COVID pandemic and with supply chains being squeezed prices started to rise.
Why? That’s just how it works. Printing more money means you dilute its value.
Things took a nastier turn when Russia invaded Ukraine in February 2022.
Meanwhile inflation continued to increase peaking at 9% in June 2022.
To address inflation the Fed raised interest rates.
This makes money more expensive.
Companies can no longer borrow at cheap rates.
Maybe you won’t take out that mortgage to buy a house and maybe instead of spending your money (because things will only get more expensive) you will save it now that interest rates are more attractive.
As a result investors start viewing the stock market as a less attractive place to park their funds.
In Europe things are even harder.
While the European Central Bank plans to raise rates to combat inflation, Europe is also facing an energy crisis after refusing to buy Russian gas that supplies anywhere between 40-60% of gas for the average EU country.
For example, before the war, Germany received 55% of its gas from Russia.
The blockade has put massive upward pressure on gas prices.
In my country, Greece, the price of 1 kWh of gas has gone up more than 5 times since the beginning of the war.
Currently, the excess is being subsidized by government but this can’t last. At some point they are going to need to print more money exacerbating inflation or let households suffer deepening the recession.
How the market downturn pulls Strong Coin down with it
All of the above have reduced investors’ appetite to invest in stocks.
As the economy pulls back their appetite for risk-on assets such as crypto is even more reduced.
You may be thinking: but what has Strong Coin got to do with all this?
You like its business model. Why should it have anything to do with Bitcoin or the broader crypto market or stocks? And in any case isn’t Bitcoin an inflation hedge?
Unfortunately for you it doesn’t work like that.
If big money is pulling out their investment then this puts downward pressure on prices for all of crypto.
And due to this downhill momentum everyone is thinking “OMG I need to sell”.
Now, in the case of Strong Coin this downward trajectory makes things even worse. Which brings me to my second point
2/7. Strong Coin has a long incubation period
If I buy Bitcoin or Ethereum today then I can recoup that investment at a loss or profit any time I want by selling.
With StrongBlock it’s not like that. I need to buy a node and then wait for at least 100 days to break even.
For instance, an Ethereum node will cost me 10 Strong Coin and StrongBlock will pay me 0.1 STRONG per day over 200 days.
This means that in order for me to break even, the price of STRONG must not fall by more than 50% over these 200 days.
That’s 6.5 months people!
Who’s to say we have reached the bottom and that the price won’t drop further?
When I look at the graph and the downward sloping price I don’t feel very confident we have reached the bottom.
Even where the line looks flat in the graph if you zoomed in you would see the price is fluctuating +/- 30%.
As a result people have a lost a lost of money. And they have started to point fingers which brings me to point number 3.
3/7. Many people think that Strong Coin is a scam
People lost a LORRA of money by investing in Strong Coin.
They are now accusing it of all sorts of things from being a ponzi scheme to being a scam.
There are even those who believe that StrongBlock is fraudulent and that they do not actually set up any nodes on behalf of users.
The abundance of content that has now taken a negative stance against Strong Coin on crypto Twitter and YouTube discourages new investors from investing. This causes Strong coin to sag further.
In my article “Is strong coin legit?” I explore in further detail all the criticisms against Strong Coin.
A key reason people are unhappy with Strong Block is the transition to STRNGR.
4/7. The introduction of STRNGR and cap on returns
In April 2022 StrongBlock introduced a new token called STRNGR. New coin same model. The only difference is that the supply of STRNGR is flexible.
This really pissed people off. Being able to print more tokens means that token holders’ value will be diluted.
Whoever held STRONG was given an equal amount of STRNGR.
The price of STRONG immediately dropped 70%.
Then in May the price further slumped because StrongBlock announced a cap on returns.
Whereas in the past they would pay you 0.1 STRONG per day indefinitely they were now tapering rewards.
On Ethereum nodes for example, you could only earn a maximum of 20 STRNGR after which you node would would shut down.
Moreover those who were left holding STRONG coin did not know exactly what to do with it.
StrongBlock suggested that when they transition to their new in-house blockchain called StrongChain maybe Strong Coin can be used as a governance token.
The price of Strong Coin currently trades at a premium to STRNGR.
While current circulation is the same for both coins, the difference in prices shows the discount that investors place on STRNGR due to its potential to inflate.
At the same time they may be placing a premium on STRONG because it might become a governance token.
5/7. Competing products
In December 2021, shortly before Strong Coin’s price started to nosedive a bunch of competing protocols emerged.
Project X, THOR, POWER, LVT, PXT2, Flits, POKT, Beacon all offered similar products to StrongBlock.
I monitored some of the discussions on Reddit from that time and see some people were abandoning StrongBlock to get in early on these alternative bandwagons.
But I don’t think any of the above are the key reasons why Strong Coin is sinking.
I believe the key reason has to do with the lack of a real business model.
6/7. StrongBlock is not generating any revenue
For me the key reason that Strong Coin is plummeting is that there is no revenue coming into the business.
For any asset there are two forces that affect its price.
The first is momentum.
If everyone is screaming “to the moon” then this momentum pushes prices up for a while.
In the bull market there was so much optimism that you didn’t really need to understand the fundamentals. The fear of missing out propelled you to buy more.
The second is fundamentals.
You go back to fundamentals when momentum is lost.
In a bear market you need to be able to separate which protocols are creating value and which ones were just duping investors into buying their token.
What value does the protocol generate?
In the case of StrongBlock it is easy to answer.
“Dude! Hello? They set up a full nodes. These are very valuable”.
The problem is that no-one really wants to pay for these.
So what is the business that StrongBlock is really into? No one has been able to answer this so far, not even Strong Block.
And this brings me to my final reason for the price drop.
7/7. Bad PR
While StrongBlock have announced a new blockchain there isn’t much information on how this new chain will generate revenue.
Meanwhile StrongBlock has turned off comments on its Twitter account and the chatter on Discord is minimal and of no consequence.
Unless StrongBlock starts to instill some confident in the market that they can generate revenue and are open to scrutiny I don’t think the price will move upwards.
Alternatively, it will just follow the up and downs of the broader market and will eventually die out.
And that’s a wrap folks!
Hey! You’ve reached the end of this article. If you enjoyed reading it you can scroll down to subscribe to my newsletter.
Have a great day!