It's obvious when you look at the numbers.
In the wake of the successful launch of Animal Farm (AF), people are anxiously checking the DRIP price chart, wondering when it is time for the DRIP price to pump. After all, that's what was supposed to happen. That's what has been promised, and it was repeated time after time in a self-amplifying loop in Telegram chat and other social media. But instead, the price has continued falling to the great surprise of many of the DRIP maxis, but not for me.
"Wen moon?" - Telegram DRIP group member
You have been lied to
As I have pointed out in a recent post, it is to me obvious that price increases based on true added value, and AF simply represents a lot of added risk capital, i.e. more competition, but little true value. So I expect prices to fall until we see revenue from products and services flowing into the ecosystem.
To be fair, the AF launch does bring at least one positive news for DRIP, the tax vault buybacks. Deposits and withdrawals from the DRIP/BUSD farm are taxed (1%/2%) and these taxes go to the tax pool. This is one of the things that have been hyped up in the TG groups and caused an expectation of a price pump. The reason for this is simple: The more DRIP is in the tax vault, the less DRIP has to be minted to pay those who claim. Minting new DRIP means dilution, so we want a big strong tax vault.
The only problem is that it is not enough. We can look at the tax vault on bscscan [1]:
Since Nov 1st the DRIP balance in the tax vault has gone up but has quickly deteriorated again.
Another factor is the expected side effect of DRIP getting more attention from new investors after the AF launch. Instead, we see the opposite happening: People are claiming DRIP to pay for AF deposits instead of injecting fresh new capital. I guess it is a bear market symptom.
Also, the daily new accounts count has slightly fallen after the launch [2].
A closer look
These are some explanations as to why the DRIP price keeps falling. But we can take it one step further and calculate more accurately how the price will evolve. How? By the blessing of blockchain transparency, of course! All the data we need are readily available. First, we need to look at the wallet size distributions available at https://www.dripnetwork.ca/ [2]
The magic number here is 27397 (100k divided by 3.65). Once your deposit reaches that number, there is no point in hydrating anymore, and you can start claiming every day, giving you around 274 DRIP per day, minus taxes which ends up at 246 DRIP ($942 at the current price of $3.83). There are currently 179 players in the 27k+ range. This means that there are 179 players potentially claiming 246 DRIP which again means that 44034 DRIP will potentially be extracted from the tax vault every single day.
How long will this be going on then? Assuming they have only hydrated and not claimed up until 27397, they have 72603 DRIP to go until 100k. Divided by 274 equals 265 days. So unless AF buybacks exceed 44k, we are in for a bumpy ride for the next 8-9 months, or a little less if they have claimed along the way.
Of course, we have not considered the fact that many of those wallets are likely closer to the 100k max than others, meaning that they will stop claiming. So then we will eventually be off the hook, right? Nope. We are forgetting the wallets just below 27k. The graduates. The apprentices. But can it really be that bad?
There are only 16 players in the 26k-27k segment. That doesn't sound too bad! But we need to think logically about this. Of course, we could calculate exactly the expected sell pressure by looking at each individual wallet, but that would require a bit of calculation beyond the scope of this article. Instead, let us do a rough estimate. We need to consider a 265-day period since that is the longest time we would possibly have to wait to get one of the current claimers to max out.
So, an interesting question is then how many DRIP do you need in your wallet to reach 27397 in 265 days? For simplicity, let's assume only hydrating, no claiming. The equation is:
X*1.0095^265 = 27397 *)
12.25x = 27397
x = 2236
*) 1.0095 represents 1% minus the 5% hydration tax, i.e 1.01 minus 0.005.
This means that if all players only hydrate and do not buy any more DRIP, every player owning at least 2236 DRIP will reach the 27k level in 265 days. Why is this important?
There are currently 5016 players owning between 2000 and 27000 DRIP. In 265 days, they will potentially be in the 27k+ range, claiming 274 (246) DRIP every day, amounting to a staggering total of 1 233 936 DRIP being requested from the tax vault. 1.2M - every single day!
Averaging out the increase in sell pressure means that the pressure will increase with 4490 DRIP every day. After just one month this means 134k DRIP in extra tax vault withdrawals. Now, you have to ask yourself: Do you really think that the Animal Farm will generate enough taxes to compensate for that?
These are quite disheartening numbers. But there are several factors not being considered: For example, that increased sell pressure will cause lower prices, which again will make it easier to make buybacks. Second, new players will arrive in both DRIP and AF, providing tax payments and burning of staked DRIP. And third, the release of actual products, like scratchies, will generate external revenue that will boost the liquidity of the ecosystem directly.
It is so easy to get mesmerized by the enchanting promise of a 1% daily return. But in the end, we have to remember that money, even in crypto, cannot materialize out of thin air. There is value added to the system. Going through the system, the value might take complex paths. But in the end, it is not possible to end up with more combined value than was initially added.
The solution
Writing these posts, I am always worried that my readers will think I am a DRIP bear, a hater, a critic. And I'm worried they won't stick to the end, because here comes the good part: DRIP is far from dead or dying!
"But you just said that there will be enormous sell pressure, most likely causing the DRIP price to fall??"
Yes, I did, and it will. Just while writing this article, the price has fallen almost 50c. And it will continue falling. But here's the good news: You can still get on top!
Here are my top 10 pieces of advice to benefit the most from DRIP:
Change your mindset from "wen moon" to "I expect prices to fall, but I can still earn money"
Be patient! If you have a small bag, don't be tempted to hydrate every day or several times a day. Use available tools and calculators to figure out the ideal hydration schedule
Claim! Now and then it is ok to claim. And it feels so much better if you can at least get your initial deposit back, and enjoy a risk-free investment.
Be consistent! Make a hydrate/claim schedule, and stick to it.
Do NOT go all in! DRIP is high risk, you can lose it all. Don't listen to the maxis. Play your own game, and do not risk more than you can afford to lose.
Do DCA (Dollar Cost Average). Especially when the price falls more than 1% per day, it might be a good time to buy more, especially at the beginning of your journey. This can give you an edge over the competition. But remember, only bet what you can lose. And keep a keen eye on how much you buy vs. how much you claim. You don't want to over-extend yourself.
Don't lose faith! Even if the price goes down, remember that you are competing with the other players. Especially those who enter after you. The more you hydrate, the closer you get to the 27k whale level. As long as there is value in the system, there will be value to extract from the system. DRIP might not end up buying you a Lambo, but it could still be a handsome allowance for low effort.
Build your team! If you can afford at least 2 BR34P tokens for a single downline, buy them, and then recruit your friends. Just remember to be helpful, modest and humble. You don't want to be the pushy MLM guy/gal in the crowd.
Visit thedripbuzz.com for new posts and analytics
DRIP is a game. Play it, enjoy it!
Stay calm and DRIP on!
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