Indeed, this is the million dollar question. We all love to guess, predict and dream about the answer. But do we know what affects a price of a coin? Hence, in today’s newsletter, we are investigating:

1. The Law of Supply and Demand

2. What Influences Cryptocurrency Prices

3. Pi Network’s Utility, Supply and Demand

THE LAW OF SUPPLY AND DEMAND

The law of supply and demand merges two core economic concepts that explain how price fluctuations impact the supply and demand of a resource, commodity, currency or product. As prices rise, supply increases and demand decreases. Conversely, as prices fall, supply decreases and demand increases.

Supply and demand levels at different prices can be depicted as curves on a graph. The point where these curves intersect signifies the equilibrium or market-clearing price, where supply meets demand. This intersection reflects the process of price discovery in the market.

Put simply, the price of a given cryptocurrency is determined by how much interest there is in the market to buy (demand) as well as how much is available to buy (supply).

Law of Demand

As the price of a cryptocurrency decreases, the demand from buyers generally increases, and vice versa. This is because investors and traders are more likely to buy more of a cryptocurrency when its price is lower, anticipating future gains, and less likely when the price is high.

Law of Supply

As the price of a cryptocurrency increases, more holders may be willing to sell, and vice versa. This is because higher prices can incentivize miners and holders to sell their cryptocurrency to realize profits, while lower prices may discourage selling.

Market Equilibrium

This is the market price where the quantity of cryptocurrency supplied equals the quantity demanded. At this point, buying and selling pressure are balanced.

Shifts That May Effect Market Equilibrium

• Changes in demand — e.g. due to news, regulations, or market sentiment

• Changes in supply — e.g. mining rewards, halving events, lockup expirations

For instance, a sudden increase in demand without a corresponding increase in supply can drive prices up. On the flipside, a large amount of additional supply added without sufficient demand is likely to push the price down of that cryptocurrency.

WHAT INFLUENCES CRYPTO PRICES?

No one can accurately predict the price of cryptocurrency with complete certainty — anyone claiming they can is misleading you. However, you can make more informed guesses about which cryptocurrencies might increase in value over a specific period by considering several factors, such as:

1. Market sentiment — Cryptocurrency is typically a speculative asset, valued at what people are willing to pay. During a bull run with positive market sentiment, prices generally rise across the market. Conversely, in a bear run with negative sentiment, prices typically fall.

2. Technical analysis — Technical analysis examines past market data to understand historical supply and demand for a cryptocurrency. While past prices can't predict future performance, this analysis helps investors see how a cryptocurrency has performed in turbulent conditions and may reveal patterns indicating an upcoming bull or bear run.

3. Utility — Although most cryptocurrencies are speculative assets, some coins or token do have real utility. E.g. Bitcoin is a store of value, a hedge against inflation and a way to get exposure to the cryptocurrency economy; whilst BNB and ETH are used for gas fees on their popular blockchains with a many decentralized applications running on top of them.

4. Competition — Similar to physical products and services, the demand for cryptocurrencies is influenced by competition. For example, for many years, Ethereum was the go-to place for trading tokens such as memes, but due to excessive transaction fees, people opted to use Binance Smart Chain instead. Nowadays, such activity mostly takes place on Solana because transactions fees are only a few cents, a fraction of BSCs.

5. Tokenomics — Tokenomics, a blend of "token" and "economics," describes the economic characteristics of a given token. It encompasses the fundamentals that can make a cryptocurrency valuable or attractive to investors, such as yields, burns, consensus mechanisms, token supply, and token allocations. This information is typically detailed in a token's whitepaper.

6. Governance — Crypto governance refers to how a project or cryptocurrency is managed. Typically, governance is decentralized, allowing token holders to vote on future developments. However, sometimes developers retain control by holding a majority of the tokens, despite distributing some to early investors.

7. Liquidity — Liquidity measures how easily a token can be converted into fiat currency or another token at market price. For example, Bitcoin has high liquidity, making it easy to sell or trade globally. In contrast, newer tokens with limited exchange listings or small trading pools often have low liquidity, leading to significant price drops if sold.

PI NETWORK’S UTILITY, SUPPLY AND DEMAND

Pi’s Utility

The utility of Pi is supported by the time, attention, goods, and services provided by other network members in exchange for Pi. By uniting our attention, goods, and services around a common currency, Pi's members are collaboratively building the network. By utilizing blockchain technology, it can help pioneers reduce costs and avoid slippage typically absorbed by banks, tech giants (e.g. eBay, Amazon), and other intermediaries. An additional use case is for advertisers buying Pi in order to pay for advertising on the Pi platform because there are millions of people checking in the app daily and use the Pi ecosystem apps.

In stark contrast to most cryptocurrencies where they are mainly bought for speculations for monetary gains, Pi Network focuses on its currency to be used for everyday transactions and for commerce. Pi aims to be the preferred payment method for its members, and by doing so, it creates brand recognition both in the physical and digital world. Pi is represented in every country and there are millions waiting for open mainnet, so there can be an official price, so Pi can be used truly as a means of payment for any kinds of goods and services.

Additionally, Pi Network’s free mining mechanism enables the Pi currency to be dispersed on a large scale to people worldwide. Such mechanism is crucial for growth and adoption, and anyone with a phone gains full access to the Pi ecosystem to trade goods and services in exchange for Pi. Furthermore, people can create their digital Pi wallets, which grows with minimal effort, thanks to Pi Network’s unique mining mechanism and other ways of earning for securing or growing the Pi blockchain. Instead having the only option to buy Pi, people have many ways earning it by helping the Pi ecosystem instead.

Pi’s Supply

• Max Supply: 100,000,000,000 Pi — the maximum amount of Pi that can ever exist

• Migrated Total: 3,852,604,024 Pi — supply that currently exists (3.85B / 100B)

• Locked Supply: 2,627,137,393 Pi — supply that is locked up and are not in circulation

• Circulating Supply: 680,302,902 Pi — supply that is actively available for trade and are being used by the public

• Claimable Supply: 545,163,728 Pi — supply that consists of lockups that have now expired and can be claimed. (technically speaking, claimable balances are only a few clicks away from being fully in circulating supply instead, so the real circulating supply may be this and the above figure, which is 1,225,466,630 Pi in total)

Current Issues With Pi’s Supply (From An Investor’s POV)

1. Circulating vs Max supply — Would you buy a currency, if you knew its supply will be 30 times more than it currently is? This is a problem Pi faces right now. The team needs to give out all the rewards for its users, so we have accurate figures. In the whitepaper, the circulating supply is estimated to be around 20,000,000,000 Pi at the start of open mainnet. This is far from 680,302,902 (or 1,225,466,630) Pi we have in circulation today.

2. Time to Max Supply is unknown (yet) — Will we reach max supply in 5 years? 25 years? Or more? We don’t know. The team has yet to clarify before open mainnet. Stakeholders of Pi and investors both must know a projected time when mining the total supply is estimated to finish. E.g. we know the last Bitcoin will be mined in 2140. When will the last Pi mined?

3. Count those extras in — On top of mining rewards, supply such as liquidity pool reserve will enter into circulation. Additionally, we can expect the 10 billion Pi of Foundation reserve, as well as expired lockups, to be drip-fed slowly into circulation over time. How long will this take? We don’t know.

Questions such as these make estimating the starting even more price impossible. Until the air is cleared from so much uncertainty about supply, starting price of Pi is anyone’s guess (but with billions of expected circulating supply, prices at the low ranges are more likely).

We need clarity on these concerns before open mainnet. Not having adequate information about this topic will raise major red flags for investors, driving them to invest elsewhere.

6 Reasons For Pi Network’s Price To Grow

1. User Base Growth — Pi Network has amassed a significant and rapidly growing user base. As more users join and use the network, the demand for Pi could increase. A large, active community often boosts the perceived value of a cryptocurrency.

2. Utility and Ecosystem Development — The development of a robust ecosystem where Pi can be used for transactions, purchases, and services will boost its utility. Partnerships with businesses and integration with various applications can increase demand for Pi, potentially driving up its value.

3. Mainnet Launch and Decentralization — Transitioning from the enclosed to fully open mainnet and achieving full decentralization can significantly enhance Pi's credibility and utility. This step would mean Pi Network operates independently of the founding team's servers, increasing trust and potentially driving up demand and value. Additionally, a community governance could also be implemented.

4. Scarcity Through Mining Rate Drops — Pi Network’s mining rate drops every month, which means there is less Pi to be earned for every active pioneer. This controlled supply can lead to scarcity, making each Pi more valuable as demand increases or remains steady.

5. Market Speculation and Investor Interest — As Pi becomes more well-known and listed on major cryptocurrency exchanges, investor interest and speculative trading can drive up its value. Early adopters and new investors looking to capitalize on its growth potential can create upward pressure on the price.

6. Strategic Partnerships and Collaborations — Forming strategic partnerships with established companies, financial institutions, or other blockchain projects can enhance Pi Network's credibility and utility. These partnerships can lead to increased usage and acceptance of Pi, thereby driving up its value.

Final Thoughts

Pi Network is special. But it is not above the Law of Supply and Demand. There are thousands of coins listed on CoinMarketCap where key metrics about them can be easily seen. On a beautiful day in the coming months, when open mainnet finally happens, we also going to have all our fully-up-to-date token metrics listed. That is the time when we are going to find out the price of Pi as it will be listed by some cryptocurrency exchanges shortly afterwards. Accurate figures are critical for any exchange listings.

Until then, even with assessing supply and demand cases individually, we can conclude by saying this: there is still too much we don’t know with too many variables to estimate.

What To Expect Next

In contrast to many pioneers, as of now, we expect to see a volatile starting price action. Pioneers are likely to sell portions of their balances because most of them have been mining for year. This is only natural. Note, that most of Pi Network’s participants are locked and committed to 1-3 years with portions of their Pi, so they are staying.

After the initial sell-off, we expect a recovery shortly as early investors get involved at rock bottom prices. After people realize that the systems work as intended and are happy with the initial prices, we expect shortly afterwards Pi to go through a viral growth period. Mining Pi will be a no brainer for most people. Instead of promises, we can rely on facts and figures instead and it’s a risk-free way to get involved. People may be able to supplement or even replace their jobs by being a pioneer and aiding the network.

The technology and community are there, allowing Pi to compete with the best. We need a price for Pi, so we can genuinely be in the competition, but if we took all the top 100 coins and Pi to see which people can get involved with the easiest, we’d quickly find out who the winner is.

However, we all need to accept this: Pi Network is playing the long game. It is better to re-adjust our expectations and strategies right now, and view this game we are all participating in with long-term lens so we see accurately. The road to mass adoption is anything but short. So keep this in mind and keep playing!

That’s a wrap from us today!

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