Disclaimer. I do not provide personal investment advice and I am not a qualified licensed investment advisor. I am an amateur investor. Conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions.

There are thousands of cryptocurrencies with many different models for consensus. A relative small number of projects use something called a masternode to help secure their network. A masternode acts as a hub on the network that provides significant utility and security while also using a kind of escrow system to ensure honest behavior. The masternode requires the owner to deposit a set number of tokens. Those tokens represent the financial stake that the owner has in the game. When the owner operates the node honestly, then the owner’s stake doesn’t change. Should the owner become a bad actor, he/she stands to lose some of his or her tokens as a penalty.

On Monday afternoon, WaltonChain announced the introduction of Guardian Masternodes — a novel concept of pre-registering a masternode in return for potentially significant gains down the road. In order to be registered, one must have 5000 WTC in a trackable wallet like MyEtherWallet by December 10th. In order to maintain ownership of a Guardian Masternode, the balance of this trackable wallet can never be less than 5000 WTC.

The Guardian Masternode program has already caused a drastic reduction in an otherwise inelastic supply of tokens. This reduction of supply will likely create steady upward pressure on price. Due to the limited number of tokens available for sale, if a sudden increase in demand were to occur, the potential for rapid upward price movement seems probable.

Token Supply

WaltonChain has a current circulating supply of 24,898,178 WTC according to CoinMarketCap. Nearly all WTC trading is done on Binance. The wallet where Binance keeps its tokens can be viewed here. The tokens stored on Binance represent 96% of all tokens kept on exchanges.

November 27th: One hour before the Guardian Masternode was announced, Binance had 3,760,193 WTC (15% of the circulating supply) in its wallet.

November 30th: Binance had only 2,013,874 WTC (8% of the circulating supply) in its wallet.

44% of all liquid tradable WTC have been removed from the marketplace in 3 days.

Above: the total number of WTC tokens on the Binance wallet

Extrapolation

Given the impressive rate that tokens are moving off Binance right now, a further reduction seems inevitable. For the purposes of this analysis, we will assume that an additional 50% reduction (of the current balance) will take place over the remaining 9 days.

This would leave 1,006,937 WTC (4% of circulating supply) available for sale on the exchange.

Economics 101

Basic economics describes the relationship between supply, demand and price. In our case, the supply of WTC on exchanges has been reduced from 15% to 4% of the circulating supply, while the demand has presumably stayed the same or has increased as the December 10th GMN deadline draws near.

If demand decreases, the low supply of WTC being sold will have a reduced effect on price, minimizing any decrease in price.

If demand remains constant, the significant reduction in supply will lead to a thinning of the order book on the sell side of the exchange. Price will begin to creep up as there are not enough sellers to meet the demand.

If demand increases, rapid price movement is likely due to the very low supply of WTC on exchanges. The possibility of a feedback loop (fed by price reactivity) causing an acceleration in demand seems likely as well. In this scenario, price would skyrocket very quickly.

Specific thoughts on price

If demand remains constant, I would expect a 200–300% increase in price over the next 30 days as the market tries to find a new equilibrium. This would translate to a price in the range of $10.34 to $15.51.

If demand increases, I would expect a 400% increase in price at a minimum. The upper bounds are impossible to predict if a FOMO event takes place. However, 1000% is entirely possible in that scenario. This would translate to a price in the range from $20.68 to $51.70.