Tezos and its exchange rate with the euro
Tezos is a decentralised platform that allows users to create advanced smart contracts. Tezos differs from Ethereum in two main ways.
Understanding the price of Tezos.
What is Tezos?
Tezos is a project that aims to compete with Ethereum. It wishes to propose a more reliable and secure protocol that would limit errors in smart-contracts. For this, they decided to use different languages and facilitate the verification of the code. The company conducted an ICO (cryptocurrency fundraiser) in September 2017 that amounted to 232 million in BTC and ETH.
As a public blockchain, Tezos provides an economic incentive for transaction validators to secure the network via a purely Proof-of-Stake system rather than Proof-of-Work. This system allows the holders of the XTZ token, the platform’s native asset, to easily access their share of the system’s monetary creation, which is not monopolized by miners.
Unlike Bitcoin or Ethereum, the Tezos protocol incorporates a protocol improvement process that asks XTZ token holders to vote for the improvements they want to see added. This ensures that the chain used is the authentic chain, in case of a protocol fork. Designers of enhancements can attach an invoice that will be paid for by additional monetary creation, which provides an inherent economic incentive in the system to improve the protocol.
How has the price of Tezos changed?
How has XTZ performed in recent weeks?
Since hitting its all-time high on 4 October 2021, Tezos, or rather its token XTZ, has been in a downward trend. On that day, 1 XTZ was worth €7.85, while by mid-April in 2022, its price was moving around €3. That is about a 62% drop for XTZ against the euro.
However, the XTZ / EUR pair has not been falling for the entire period. Tezos saw its price touch €2.67 on 14 March before rebounding above €3 a week later and continuing its run up to €3.66 by 4 April. Tezos offers short-term opportunities to current investors: watching the XTZ/EUR pair very closely could be of interest to DIY investors or Coinhouse account holders receiving analyst advice.
How has the price of Tezos performed in the past?
Just like with the majority of cryptocurrencies, the XTZ / EUR exchange rate has seen heavy fluctuations since the launch of Tezos. On 30 June 2018, XTZ was launched at a price close to €2.50. It quickly dropped below €2. Tezos even reached an all-time low in December of that year. On 7 December 2018, 1 XTZ was valued at 31 cents but Tezos’ price has never returned to such lows.
In 2019, Tezos saw its price almost go in a straight line up until passing €3 in February 2020. That year brought major fluctuations in the price of XTZ, which dropped to €1.21 on 13 March before rising to €4 in August and levelling out under €2 for the most part of the final quarter. There was little difference in stability in 2021: spikes above €6 on 17 April and 6 May interspersed with a drop to €3.70 on 25 April. In that same year, the exchange rate of Tezos for euros recorded its all-time high with a price of €7.85 for one XTZ on 4 October.
What determines the price of Tezos?
Tezos’ price is based on supply and demand
XTZ like the majority of currencies moves according to supply and demand. The more people buy XTZ, the more the token is valued and its price increases. Conversely, when the holders of a cryptocurrency lose confidence in the asset, they decide to sell which puts downward pressure on its price. A transaction by a single large investor on the market (whether buying or selling) can have a huge impact on its price.
Beyond the usual factors (e.g., economic situation) that have a hand to play in the financial markets, cryptocurrencies are evolving within a new world marked by increased democratisation and legalisation. In France for example, the buying and selling of crypto-assets must now be declared on tax returns. This type of legitimacy gives investors more confidence in cryptocurrencies.
The XTZ/EUR pair also depends on Tezos
Every cryptocurrency has its own characteristics and history. The combination of these aspects inspire confidence in investors. In the case of Tezos, it is a blockchain project that started in 2014 though its token, XTZ, did not start to be traded until four years later.
It is an ambitious, innovative project using a public yet participative blockchain. XTZ holders can decide on how the blockchain should be improved. Moreover, its blockchain is based on a highly reliable, secure protocol using a proof-of-stake consensus mechanism.
However, the turmoil suffered by its parent company, the Tezos Foundation, has had deleterious effects on the XTZ/EUR exchange rate in the past. The company had a conflict with its founders on who owned the project, which delayed the launch of XTZ and perhaps had a hand in the initial torpid performance of the Tezos token.
What is the outlook for Tezos?
Past mistakes are a thing of the past!?
In September 2020, the Tezos Foundation paid out $25 million to investors to settle a class action lawsuit. Those investors had participated in the Tezos Initial Coin Offering that took place in July 2017 and raised an ICO record of $232 million. The investors were suing for, among other things, the fact that the tokens were only delivered in summer 2018.
These errors, which delayed the launch of XTZ and certainly impacted its price, now seem to belong to the past. Tezos is still an asset worth watching for the future.
What Tezos has going for it
Tezos has several aces that could give hopes to investors that XTZ will appreciate against the euro in the future. Firstly, Tezos decided to secure its network through a proof-of-stake mechanism rather than a proof-of-work one since its inception. Ethereum is currently moving, for environmental and other reasons, from PoW to PoS with its The Merge update. Such developments bode well for XTZ.
Elsewhere, Tezos is a participatory blockchain that gets the opinions of XTZ holders for its future and encourages developers to assist in its expansion for compensation, incentivising its development. This could create a positive feedback loop: developers and investors participate to improve the project, increasing the price of Tezos, spurring on more participation and improvements.