Recently the principle of so-called reflection payment coins has become very trendy. I have seen lots of crypto-influencers on Twitter write about them and also brag about awesome gains and how they received awesome payments regularly with Avapay (in USDC), with ZAZA (in JOE), and the most recent is receiving Ethereum rewards with EtherPrint. One month ago, I really liked the concept as well as I first read about it and tried it with OHMINU (it started on Ethereum but recently moved to Avalanche), but that has changed seeing how they normally end up working. What do I mean?
The reflection-based coins are supposed to do the following:
- Whenever a transaction is made, a tax is deducted from the total amount. The tax might be anywhere between 5% and 20%.
- A part of the tax is later used to pay holders who already hold the token. The more you own, the higher the reward.
- Because of the tax system, you are encouraged to just hold the tokens and not really sell them (as you will always pay the tax fees when you buy or sell).
This sounds really cool, and that is why I originally embraced OHMINU as I read about it. There is, however, one problem that I have seen several times now.
The problem with all these coins…
These are all running with incredible numbers, making it feel all the more fun. In the start, nobody knows about the coin, and that leaves it with no transactions, no taxes, no rewards. But then, someone discovers this hidden gem, buys it, and spreads the word about it. People quickly start to buy, a lot, and the earlier you join the party, the more fees you will gather. It is actually very similar to a pyramid game in which those on the top, those who entered early always reap the benefits of everyone else. The closer you are to the top, the better.
But, that isn’t all. Let us take a look at the chart of OHMINU first, from their time running on the Ethereum blockchain.
The chart is based on daily candles, and as you can see, the interest spread rapidly, and the volume was spiking on day one, and after that, it was kind of stable, slowing down, and after two weeks, it was nearly dying out. What happens when it dries out? There are no more transactions, no more fees, and no more fun in holding the coin.
Those with some experience will notice that during the peak, the volume started to decline, meaning that the rewards are about to decline, and then they sell and leave the party. Not only did they buy early (and cheap) and sell at way higher prices, but they also enjoyed the rewards from the busiest days in the life of the protocol.
Let us take a look at ZAZA, running on Avalanche with Joe rewards.
Zaza is running using exactly the same principle only that it didn’t live for as long as OHMINU did. Just take a look at the chart which is a chart with four-hour candles.
ZAZA didn’t last for a long time. But, someone picked it up early, shared the word, then it topped the volume list on TraderJoe for some hours, gave some nice profit to early owners, then they sold, had a big gain, while most other people picked up tokens worth nothing and not bringing any more rewards as the volume turned to zero.
AVAPAY looked promising – but, what happened to AVAPAY?
AVAPAY promised to pay their holders in USDC, and I have to be honest, they did and they still do. But, what happened with AVAPAY? Check this tweet from December 3rd.
Doesn’t that sound just sweet? It is just booming, and someone here was earning lots of USDC fees and became very happy. But, what happened to AVAPAY In the days following December 3rd? Let us take a look at the chart.
Do you see it? Once again, it is booming, the influencers tweet about it, it rocks, even more, people earn lots of money on the rewards… but then it just stops. There are not enough new buyers coming in all the time, and since everyone follows the concept based on just holding the token (which is supposed to give a constant flow of rewards), no new fees are generated, and it just becomes junk coin. Even worse, as the big holders notice that the volume is dropping and rewards are reduced, I guess they sell and look for a new project to pump instead (I would at least have done so myself).
The newest kid on the block, EtherPrint (ETHP)
This awesome gem launched on December 5th and it has been rocking Twitter ever since. People have earned almost 1 ETH in fees and it is just fantastic. So, why shouldn’t you join the party as well? Have you seen the charts above? Now, let us take a look at EtherPrint and their chart after a couple of days.
For the sake of the buyers and holders, I hope I am wrong. But, to be honest… I expect this to start dropping in both price and volume within a couple of days (maybe earlier). What will happen then? The big whales will start to sell, the volume remains there for a little while, then it dies out, and EtherPrint will “enjoy” the same fate as OHMINU, ZAZA, and AVAPAY.
A few days later with ETHP (update on December 13th – the article was originally written on December 10th)
ETHP is still sticking around, and even though there have been quite a lot of red candles throughout the weekend, it all culminated in what was the biggest green candle so far after a major dump. This might mean that people were waiting for a dip and really wanted to buy more. ETHP has also released news about them wanting to create a platform like Wonderland on AVAX, but who knows… I would pay careful attention in this upcoming week, and for the sake of the investors, I hope I am wrong, but I still wouldn’t dare to invest here.
So, I have a feeling that the hype is disappearing, influencers rather write about all the other RING and THOR node forks here and there, and somehow, I fear this will just lose volume and fall dead quite soon.
What do you think?
These are my thoughts on the topic and I just wanted to write this article to share it would you and share my concerns. What do you think? Do you agree with me? I would love to hear your thoughts and comments!
