Source: Inked Pixels – Shutterstock
- Weiss Ratings is predicting that the Ethereum based SNX token will triple in price by the end of 2020.
- The analysis company considers the advantages over the traditional financial market, the low available supply and the emergence of the financial derivatives market as the main bullish factors.
The growth and potential returns of Ethereum‘s DeFi sector are currently two of the hottest topics in crypto space. Investors are eagerly looking for the next token that will skyrocket. The agency Weiss Ratings seems to have found it. According to one of their reports, the native token of the Synthetix protocol, SNX, will be one of the biggest winners by the end of the year.
The report notes that SNX is “at the heart of the growing DeFi” and examines the advantages of it compared to the traditional financial system. According to Weiss Ratings, the advantages are manifold in terms of cost and time alone. Referring to banks, brokers and other traditional intermediaries, Weiss Ratings states that Synthetix “will eat their lunch”:
Synthetix dispenses with these intermediaries, but still allows traders to do business with folks they don’t know and have no reason to trust — with no fear of getting cheated. That’s because the blockchain automatically ensures the integrity of every transaction — and at a fraction of the cost of the customary army of middlemen.
Because of this, traditional asset brokers, banks, and other intermediaries increasing face an existential threat to their business model. DeFi platforms like Synthetix are going to eat their lunch!
In combination with the above, Synthetix has another advantage which, according to Weiss Ratings, will continue to push investors to its platform: Anyone can trade on Synthetix. Users need only have an asset and an Ethereum address. There is no “Know Your Customer” (KYC) policy, no waiting times or requirements as required by banks.
Bullish reasons for the Ethereum based SNX token
Owners of SNX stake their coins to create synthetic instruments called synths — which are used for trading on the platform. These synths and others are all available for trading and include sUSD (a stablecoin linked to USD), sBTC and sETH (synths that act as a representation of Bitcoin and Ethereum).
Unlike traditional exchanges, Synthetix does not use the order book model for trades. Instead, liquidity depends on the level of the collateralized SNX. The more collateral is provided, the more synths can be generated and the more liquid the corresponding trading pair is. Because of how it works and the benefits mentioned above, Weiss Ratings predicts that Synthetix and its native token will “cannibalize” the agents of the traditional financial system.
However, Synthetix (SNX) has long since ceased to be an insider tip. The SNX price has risen by 45% within the last two weeks, by 63% within the last month and by an astonishing 1.940% with the last year. At the time of writing, the price of SNX stood at $6.35.
Weiss Ratings also notes that SNX will grow due to the incentives for staking the token. Although the rewards for staking may vary, they remain attractive to investors. This is evidenced by the fact that 70% to 80% of the SNX supply is staked. As a result, there is very little left to satisfy market demand:
This is a big deal because coins staked as collateral for synths are sequestered on the blockchain. And that amounts to a monster subtraction from circulating supply. And with fewer and fewer coins available for normal buying and selling … it doesn’t take much buying pressure to send prices up sharply.
Finally, the Weiss Ratings report predicts an increase in the price of SNX due to the emergence of the financial derivatives market. As the report states buying SNX is like buying stock in a highly-liquid crypto exchange with derivatives trading. And while futures and leveraged trading have not yet been launched, binary options started trading on July 1. In 24 hours the price jumped from $1.90 to $2.60 and in 44 days to the current price of $6.35. On this basis, Weiss Rating comes to the following conclusion:
This is just a taste of the gains that are likely in store as Synthetix launches crypto futures and leveraged trading — sometime between now and year end.
Combine all three of these reasons, and we think you can probably see how our forecast for SNX to triple by year end is actually quite conservative. In truth, your gains could be a lot larger.