Quote Originally Posted by touchring View Post
This is quite true. When crack is banned, the price goes up many times!
Those sorts of drugs are a consumable where addicts chase dopamine rush highs that become ever more elusive as they burn out some of their dopamine nerve axons.

For virtual assets like cryptocurrencies and domain names, liquidity drives price.

  • When Bitcoin Cash was added to Coinbase it jumped & capital that was reallocated into it caused Bitcoin to slide.
  • One of the reasons Coinbase is in no rush to add any other cryptos is if Bitcoin tanks it kills the narrative for most of the other coins as well. If narrative of Bitcoin becomes impaired over the longer term then sales pitch of "next Bitcoin" is much less sexy.

Adding friction / cost / uncertainty to financial transactions may increase the profit margins for remaining exchanges, but it should be a net negative for prices of the asset class overall as people feel they will have to pay a bigger fee or face more uncertainty to enter or exit the position.

Compare currencies to other financial markets or asset classes.

  • If homes saw dramatically higher interest rates for any loan terms beyond 5-years, would home prices go higher or lower?
  • If people could get a 3.5% 30-year loan to buy gold & keep the first $250,000 of gains tax free on cashing out, would gold prices go higher or lower?

As far as virtual assets go, comparing crytpocurrencies to domain names isn't all that far fetched.

  • Both were speculative markets that had heavy investment from mainland China for a period of time, viewed as desirable for their portability to get around capital controls.
  • In domain names Chinese investors preferred short 3 & 4 letter domains (nicknamed CHIPS) bought for their "scarcity." In some cases some of the purchases were in off-beat TLDs, but the highest prices were consistently in .com. ccTLDs can also sell for good prices in some cases, but there is typically a steep fall off in prices between .com and .net or .org & then another steep fall off between .net or .org and stuff like .info, .biz, and all the new TLDs that launched a few years back.
  • Bitcoin proper is akin to .com domain names. To stretch the analogy a bit, Etherium would be like the combined market of country level domains (ccTLDs) .co.uk, .de, .fr, .ca, etc ... since many ICOs trade on the Etherium chain.
  • What happened to domain prices as a flood of new TLDs were launched a few years ago? They tanked. They not only went nowhere, but they also impacted the prices of other existing domains - especially the oddball stuff like hyphenated names, 3 and 4 word longer domain names which are harder to remember than short & brandable names, domains in less desirable existing TLDs like .info or .biz, etc.
  • Who bought up some of the popular domain portfolios that had accumulated over many years? GoDaddy (Marchex portfolio, Kevin Ham portfolio, Michael Berkens / Worldwide Media portfolio, Names.com / Donuts portfolio, Elite Domains portfolio, DomainSource portfolio). They have the ability to sell the most names (often at lower prices than what other sellers would sell at) because they can put their aftermarket inventory front-n-center on their website as people go to register new domain names. They play a similar role as Coinbase does, where the exchanges help determine liquidity, which in turn helps determine price. They have nearly 50% marketshare on domain registrations. And as they gain share in premium sales they have more sales data to use to price their remaining premium names.
  • GoDaddy also to some degree controls the liquidity of the other new TLDs, having the ability to arbitrarily drop extensions which they feel are overpriced or have other issues with. Some TLDs - like .xyz - did clever pricing promotions & bundling to try to drive adoption, but most of them served to sustaining purpose, which is why the volumes registered fall off a cliff when the promotional price period ends. Anything above free is too expensive for some distractions that have no redeeming qualities & no longterm value. And even free is a bad deal if it turns into a negative option recurring subscription for something with no use.

There can still be rare one-off sales for big money on rather illiquid domains, but the broader market price has trended downward as the marketplace has become more saturated.