[Column] Which Coins Strengthen as Prices Rise

An image metaphorically representing the rise of Bitcoin. Source=Doug Kelley/ Unsplash

Recently, I came across a very interesting logic explaining the rise in the price of ZEC (Zcash). It was that the higher the price of ZEC rises, the better it becomes.

For general assets, as the price rises, they become more expensive. Their attractiveness decreases. If a company's profits remain the same but its stock price doubles, the valuation burden increases accordingly. The number of shares that can be bought back with the same amount of money is halved.

However, some virtual assets (digital assets) may be the opposite. As the price rises, the security and liquidity of the network increase, allowing it to accommodate more funds, thereby improving the product itself.

Hearing this logic, I saw another criterion for evaluating digital assets.

How do price increases and decreases affect the intrinsic value and competitive strength of digital assets?

ZEC: Price Increases Improve the Product

The core of the ZEC bullish theory is not simply that "the demand for privacy will increase."

In ZEC, users can choose between a public address and a shielded address. As the scale of ZEC entering protected transactions increases, it becomes more difficult to distinguish individual transactions, allowing more funds to move while ensuring privacy.

Here, price comes into play.

When the price of ZEC rises, even if the same quantity of ZEC is in the protected pool, the dollar value of that pool increases. A pool worth millions of dollars can naturally accommodate more funds than a pool worth billions of dollars. Price increases also enhance miners' security budgets and market liquidity.

This can be expressed as a cyclical structure:

ZEC price rise → Expansion of the economic scale of the protected pool → Increased utility as a privacy asset → Increased liquidity and demand → Additional price rise

The price rise does not merely make existing token holders wealthy; it enhances the economic capacity and credibility of the network. Assets with this structure do not mean that price increases equate to overvaluation. Rather, in certain ranges, price increases strengthen fundamentals.

However, just because the dollar value of the protected pool increases does not mean that anonymity improves at the same rate. Privacy is also influenced by factors such as the number of participants, transaction frequency, amount distribution, and wallet usage. Nevertheless, it is noteworthy that there is a clear positive feedback between price and product utility.

Why Does Bitcoin Strengthen as Prices Rise?

The asset where this reflexivity operates most successfully is BTC (Bitcoin).

When the price of Bitcoin rises, the dollar value of the rewards received by miners increases. More mining equipment and power are invested, and the cost of attacking the network also rises. As liquidity increases, larger institutions and funds can enter the market, and its utility as collateral also increases.

Price increases enhance recognition, and recognition increases the number of holders and infrastructure, which in turn strengthens the asset's credibility.

Price rise → Strengthening mining security → Expanding liquidity → Increasing social trust → Expanding demand for value storage

Gold also has value because of its high price, and it maintains a high price because it is believed to have value. Monetary assets do not completely separate price and value. The price itself constitutes part of trust, liquidity, and exchangeability.

XMR (Monero) has a similar nature. While the price increase does not directly improve cryptographic privacy, it does enhance mining security, liquidity, and privacy purchasing power. If ZEC is an asset whose economic capacity is significantly improved by price increases, XMR is closer to an asset whose usability of an already completed privacy product is expanded.

Network Tokens Are Two-Sided

Smart contract platforms like Ethereum and Solana are more complex.

When the price of ETH (Ethereum) or SOL (Solana) rises, the dollar value of staking rewards and the economic cost of attacking the network increase. The collateral value of the ecosystem and total deposited assets also rise. Developers and capital flow in, which can strengthen network effects.

However, there are also opposing effects. The rise in token prices can increase the fees that users bear and the entry costs for validators. Of course, actual fees are determined by network demand, the fee market, and price adjustments per unit, so they do not move in a one-to-one relationship with token prices. However, it is true that rising token prices increase security and collateral value while also raising access costs and valuation burdens.

In such assets, price increases do not unilaterally improve the product.

Price rise → Strengthening economic security and collateral

Price rise → Increased user costs and investment entry burdens

Ethereum, Solana, BNB, Sui, Avalanche, etc., generally fall into this middle ground. Their value is not completed solely by token prices. Actual users, applications, and fee demand must also increase for positive reflexivity to persist.

Business Tokens Are Similar to Stocks

On the other hand, business protocols like Hyperliquid, Aave, PumpFun, and Raydium should be viewed in a completely different way.

Their core is actual revenue, such as transaction fees, lending profits, and token issuance fees. If the generated revenue is linked to buybacks, burns, or rewards for token holders, it can become a great business.

However, just because the price rises does not mean the product directly improves.

If the token price of HYPE (Hyperliquid) doubles, it does not mean that the speed of execution on exchanges doubles or that the number of users doubles. If revenue remains the same, the number of tokens that can be bought back with the same buyback funds is halved. The expected return for token holders also decreases.

Price rise → Increase in market capitalization relative to revenue → Decrease in buyback yield → Increased burden of additional rises

These assets take the form of digital assets, but their valuation methods are gradually becoming closer to stocks. It is necessary to separate whether it is a good project from whether it is a good price. No matter how excellent a business is, if the price rises faster than revenue, the investment attractiveness decreases.

That does not mean that business tokens are inferior. Projects like HYPE that invent new trading infrastructures and generate actual external demand and revenue can have very strong economic moats. However, the price rise of such tokens does not automatically improve the product like Bitcoin or ZEC. Ultimately, profits and market share must follow the price.

When Token Prices Distort Products

In some utility tokens and DePIN (Decentralized Physical Infrastructure Network) projects, price increases can actually undermine product competitiveness.

Consider a network that rewards real-world services like computing, storage, and wireless communication with tokens. When token prices skyrocket, the dollar value of the rewards paid to providers also surges. More businesses and equipment enter the network.

The problem arises when actual customer demand does not increase accordingly.

Price rise → Surge in providers → Excessive facility expansion beyond demand → Selling of reward tokens → Price drop

In this case, the price rise acts as a subsidy for expanding supply rather than a result of increased demand. A network maintained solely by token rewards without external customer payments easily becomes a circular financial structure rather than a business.

When evaluating DePIN projects like Render, Akash Network, and Filecoin, it is crucial to focus not on token prices or the number of providers but on whether external customers who do not buy tokens are actually purchasing services and whether that revenue is increasing faster than token rewards.

Meme Coins: Price Itself Is the Product

Meme coins are at another extreme.

Assets like DOGE (Dogecoin), SHIB (Shiba Inu), and PEPE (Pepe) do not separate price, interest, and community. The act of people holding and talking about them is part of the product itself. There is a saying that "interest is currency."

When the price rises, media exposure and social media activity increase, and more exchanges and services support the token. As liquidity increases, more participants flow in. From this perspective, meme coins exhibit very strong reflexivity.

However, this structure operates exactly in the opposite way when prices fall.

Price drop → Decrease in interest → Contraction of liquidity → Community exodus → Further decline

Bitcoin has a foundation of security, liquidity, and demand for value storage. Privacy coins have the utility of censorship-resistant transactions. Pure meme coins have much less left after the price and interest disappear.

Meme coins are closer to being assets that "only get better while the price is rising" rather than "assets that get better as the price rises."

Four Questions to Consider for Digital Assets

Applying this framework, digital assets can be roughly divided into four types.

First, assets where price increases strengthen security, liquidity, and monetary utility. Bitcoin, ZEC, and XMR fall into this category.

Second, assets that strengthen the network with price increases but also raise user costs and valuation burdens. Major smart contract platforms like Ethereum and Solana are close to this.

Third, business tokens where revenue growth is more important than price. HYPE, AAVE, PUMP, and RAY are representative.

Fourth, assets where token prices can act as subsidies for providers, distorting product economics. Many DePIN and utility tokens with insufficient real demand fall into this category.

Therefore, when looking at new coins, it is necessary to ask not only about technology or narrative but also the following questions:

Does the product actually improve when the token price doubles?

If the product improves, what aspect—security, liquidity, collateral, or user experience—improves?

Does the price increase create user costs or distort supply?

After the price drops by half, does the demand and revenue for the product remain?

The last question is particularly important. In a bull market, almost all tokens appear to be good products. This is because the reward value increases, attracting providers, developers, and communities. However, it can only be considered a real product if users remain and external revenue occurs when the price drops.

Price Is Both a Result and a Cause

In traditional valuation, price is a result of corporate value. When a company creates good products and increases profits, its stock price rises. The mere fact that the stock price has risen does not mean the product has improved.

In digital assets, this causal relationship is sometimes reversed. Because the price rises, security strengthens, liquidity increases, and more users participate with peace of mind. Price becomes both a result and a cause of fundamentals.

This point is an important characteristic that distinguishes digital assets from traditional stocks.

However, not all tokens have this reflexivity. Some tokens improve as prices rise, some become more expensive for the same business, and some see price increases distort the economic structure of the product.

Ultimately, the important question is not just whether "the price of this coin will rise."

Will it become a stronger asset when the price rises, or will it just become a more expensive asset?

This question can serve as a useful criterion for distinguishing digital assets that will survive the next bull market from tokens that will receive temporary attention and then disappear.