Guest Post: One Investor’s View of Seasonal Tokens

Investing is the activity of allocating resources into assets from which, upon careful analysis, one expects, with some degree of confidence, to derive profit, which can be in the form of income streams or market appreciation. The process of choosing a combination of assets in which to invest is known as asset allocation, or portfolio construction. An important consideration in constructing a portfolio is to choose a set of assets (investments) which are not too correlated among each other, in other words, whose performance behaves differently in various market conditions. Choosing a set of not strongly correlated investments gives the benefits of diversification — if some investments in the portfolio underperform, others may overperform, resulting in reduced variance of the overall portfolio returns. Thus, adding to an existing portfolio a new investment which has different behaviour, not strongly correlated with the existing portfolio components, provides added value to an investor in the form of possibility of reducing the variance of returns while having the same expected return, or increasing the expected return while having the same variance of returns.
We introduce Seasonal Tokens, a set of four cryptocurrencyes (tokens) — Spring, Summer, Autumn, Winter, as such an investment, which has the potential to give benefits of diversification to an existing portfolio. The Seasonal Tokens (ST) are implemented as ERC20 smart contracts in the Ethereum network. Their pattern of production was designed to provide predictable seasonality in the behaviour of their relative prices. The tokens are Proof-of-Work mineable, and the rate of production of each token is reduced by half (“halved”) every three years. The halvings of the four tokens are nine months apart. The first halving is of Spring, which is scheduled to happen on June 5 2022. Nine months later is the halving of Summer, nine months after it is the halving of Autumn, nine months afterwards is the halving of Winter. Nine months after the Winter halving, the halving cycle continues with another Spring halving. Let us note that the total supply of each token is limited, because of the periodic reduction of the production rate by half. The limited total supply of the tokens makes them a deflationary asset.
The schedule of halvings results in having a predictable disruption of the supply-demand balance of a token every nine months, caused by the sudden reduction of its production rate by half, which is expected to result in a new higher equilibrium price relative to the other tokens. As the experience with Bitcoin (which also has a schedule of halving approximately every four years) shows, reaching this new equilibrium price is not immediate, it may take several months.
The first halving of the Seasonal Tokens is the Spring halving on June 5, 2022, which will make Spring go from the easiest and cheapest to produce, to the most difficult and expensive to produce token. Observing the behaviour of the Spring price in the weeks after that event will be a test of the viability of the tokens as a diversifying investment instrument which was designed to have seasonal patterns of relative price behaviour.

Disclosure: The author owns Seasonal Tokens.