[dropcap size=small]D[/dropcap]arkcoin’s price has skyrocketed over the past month, rising from less than $.75 a month ago to nearly $13.50 as I write this article. Darkcoin’s price has surpassed that of Litecoin, which sits at a little over $11 per coin. Of course, Litecoin’s market cap of over $320 million still dwarfs Darkcoin’s cap of $58 million, although Darkcoin is rising fast and shows no signs of stopping. Several factors played into this rapid price increase.
Most notably, Darkcoin’s developers have worked tirelessly to implement Darksend, which is still awaiting its full release. As that release date approaches, many investors are betting that Darkcoin will quickly become the de facto coin for those who desire complete monetary privacy–whether for nefarious purposes or not.
On May 25, Darkcoin will take an important step toward full Darkcoin implementation via a hardfork adding masternodes to the network. Masternodes will “bundle” transactions, further increasing the decentralization of transactions. To run a masternode, a user must spend 1000 DRK, but in return they will receive a portion of all mined block rewards.
Darkcoin’s price has also risen due to a sudden and under-publicized decision to lower the total number of coins from roughly 84 million to 22 million. This decision automatically makes coins far more valuable, although it does not account for the price rising 1800%, as it has since April 23.
Whenever a coin sustains this much growth in such a short period, fears arise about a coin dump. As long as the price is consistently rising, people are usually content to maintain their holdings and watch the value of their investments rise. Once the price stops rising, people become anxious and sell their holdings to make sure they garner a profit in case the price drops. As the price drops further, increasing amounts of people sell off their coins to avoid seeing their holdings become worth less than what they originally paid for them. This process accelerates when the market is manipulated by a “pump-and-dump.”
As a general rule, investment bubbles follow the price curve below. Bitcoin’s price fluctuation from the latter part of 2013 to early 2014 reflected this curve almost precisely.
Darkcoin’s 30-day market cap graph bears a striking similarity to the left side of the bubble curve graph above. As Darkcoin’s price rises and the media begins to give Darkcoin more attention, people will be tempted to buy into the coin before it is too late. However, this is often an indication that the bubble will soon pop. Recognizing this, investors should be cautious about dumping too much money into Darkcoin while it is on an upswing, because, like Bitcoin before it, the price could plummet back toward the mean price.
Despite strong indications that the Darkcoin price could fall rapidly once the media-hype phase is over, the Darkcoin price rise differs from other coin bubbles in one important respect–continuing development. Unlike many other coins that have seen prices rapidly rise and then fall despite no fundamental changes made to the coin, the developers of Darkcoin are continually working on the coin to add new features and improve existing ones.
Darkcoin’s price did not increase without reason. Rather, the price has climbed on the eve of the masternode hard-fork and the eventual release of Darksend, both of which will differentiate Darkcoin from the many other altcoins that have vied for the chance to step out of Bitcoin’s shadow and find their own place in the sun (or in this case, the dark). Darkcoin certainly appears to be a major player in the altcoin game. It will be very interesting to observe how mainstream merchants and the general public respond to a coin that flaunts anonymity as its most prominent feature.
Disclaimer: The author considers Darkcoin to be a coin that could sustain long-term growth, so he has invested in Darkcoin as part of diversified cryptocurrency portfolio. His comments here are mere speculation about the coin’s future, and speculations sometimes turn out wrong. Never invest in a coin that you do not believe in wholeheartedly.