Bending backward under a stick - otherwise known as the game of "Limbo" - can be a fun party game, but if you go too low you may end up hurt. Right now I'm starting to feel the pain in DRIP Network. But the worst of it is likely yet to come. So the question remains - how low can you go?
DRIP May fall to $0.1, but likely not much lower
Buckle up - we're in for a bumpy ride!
In my last price prediction, I predicted a price of $1.08 on Jan 1st, 2023, based on current market conditions. This level has already been reached, and we're now seeing prices at $0.67. In an earlier post, I gave a generally bearish outlook of DRIP based on expected selling pressure. I wish I had better news today, but looking at the current market conditions I am afraid DRIP will keep falling.
There might, however, be some light at the end of the tunnel. Features in the DRIP roadmap might get developed. The bear market may end. War in Ukraine could end. Could 2023 be a turning point for the better?
Playing the devil's advocate, things could also get worse. DRIP features may get postponed. The bear market could turn into a depression. The war in Ukraine... well, let's not get into that.
I like to be prepared for the worst. So, when talking about DRIP, it is interesting to see exactly what is the theoretically worst point we could ever reach, assuming that DRIP does not rug or completely shut down, that is. So we're talking about theoretical minimum price here.
Let's assume:
Bear market and the world economy, in general, stay bearish or get worse
No new features get released
DRIP continues to pay 1% daily
Few or no new participants enter DRIP
If this scenario continues for a long time, people will still hydrate and max out their wallets. Assuming maxed-out wallets will continue to withdraw, the price will continue to fall.
Theoretical minimum price
Some say DRIP will go to zero. I don't believe that. The reason is that many will lose interest and stop using DRIP before the price goes to zero. There are also buybacks and other mechanisms that will keep the DRIP price above zero.
The minimum price will depend on several factors, both psychological and mathematical.
If we look back a few months to Oct 1st, DRIP price was at $6.4 (Those were the days!) and the average drip deposits were 48.25 DRIP, i.e about $300. If you bought 48 DRIP back then and hydrated every day, you would have 110 DRIP today, at a total value of around $90. For this group, it is now becoming less attractive to hydrate every day, as they are paying almost as much in gas fees, as they receive in yields. But they could still wait a week and then hydrate 7-8 DRIP to grow their bag and get ahead of the game.
The question becomes, how long are people willing to wait to hydrate before they lose interest and forget about DRIP? In my opinion - as long as it takes. I could at least see myself forgetting about DRIP for 6 months or even a year, and then suddenly remembering, and then claiming or hydrating in hope of better times. But DRIP only pays 1% per day for 365 days if you are not hydrating, so there's that. So in the extreme case that you waited a year to hydrate, and then the amount of DRIP you received would be worth less than the gas fee, you would probably give up and forget about DRIP.
We can calculate the "pain point" for 100 DRIP - the point where gas fees exceed the total value. After a year you would have 365 DRIP available. Assuming $0.5 in gas fees, the "pain point" would be at 0.5/365 = $0.00137.
This might seem extreme, but we can still go lower. For someone with 1000 DRIP, you can add another zero: $0.000137. However, this does not take into account the previous buy/transaction costs, so it is probably not valid.
But what if you had a maxed wallet of 27397 DRIP, which means you have no reason to hydrate? If you have not claimed anything until that point, you will receive about 274 DRIP every day for a year, for the theoretical maximum of 72603 DRIP. If you wait for a whole year until claiming, the whale tax of 50% will kick in, giving you "only" 36301 claimed DRIP. An additional 10% withdrawal tax will leave you with 32671 DRIP to cash out. Using the previous calculation would give an absolute pain point of $0.0000153, but that would assume paying tax only once, which is not realistic. It also assumes you got a maxed wallet for free.
Buying a maxed account?
In reality, you could imagine someone buying a maxed wallet in one go, waiting for a year, and then cashing out. This would result in at least four transactions:
Buy
Stake
Claim
Withdraw
In addition, you would have to pay for the initial DRIP tokens. Also, the taxes come into play - 10% for buying, 50% for the claim (whale tax), and 10% for withdrawal.
Initially, you would have to buy 30441 DRIP to give you 27397 after the 10% tax. Then you stake those into the faucet (no tax), wait for a year, claim 36301 DRIP, and finally withdraw 32671 DRIP. A gas fee of $0.5 would give $2 in total transaction costs. Assuming the DRIP price stays unchanged for a year, we can call it X. The equation then becomes:
30441x + 2 = 32671x
2230x = 2
x = $0.000897
I think this is the absolute minimum price DRIP can reach, but in reality, it will never happen. If we round up to $0.001, and someone went through this procedure they would gain a staggering 20c in a year. That's a slim profit!
If we 10x that to $0.01, the profit is around $20. Would someone wait a year for 20 bucks? I doubt it.
At $0.1 the profit increases to $221. That sounds better, but at that price point, you would have to spend $3044 to buy a maxed account - for the possibility to earn $221 in a year. That is not a good risk/reward.
I think that this shows that buying a maxed account with dollars seems to not be worth the risk in a bear market. But what if you bought one with DRIP instead?
For this to be profitable, you would have to hydrate yourself to the first maxed account. If you started with 1000 DRIP (costing you $100) and hydrated once a day for 11 months, it would cost you $165 before you maxed out. You could then earn about $20 to $10 per day for a year (slowly declining due to whale tax). I think this would be attractive to some people.
Alternatively, for a DRIP price of $0.01, buying 10000 DRIP (still $100) would make you max out in about 3.5 months and $50 in gas fees, but earning you only $1.7 per day, meaning about 3 extra months to ROI, and then 9 months for a total of $459 minus the whale tax, which gets you closer to $200-$250 in profit.
I think $200 profit in 15 months while risking $150 is probably not worth it for most people. For this reason, I think it is possible to see a DRIP price of $0.1, but not a price of $0.01.
Final thoughts and conclusion
Keep in mind that this is an extremely bearish scenario with no positive events. Still, at this moment, a DRIP price of $0.1 in the future seems both possible and even likely. It is good to know that if this happens, it is still possible to make money and that the price is unlikely to fall much below that point!
Stay calm and DRIP on!
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