Reflection tokens are among the best passive income opportunities in crypto that can continue to pay you for life.
At the same time, many of them are scams, and you must look carefully before choosing the one(s) to invest in.
In this post, I discussed everything you need to know about reflection tokens and how to make money with them.
What are reflection tokens?
Reflection tokens are cryptocurrencies that charge a tax on every buy or sell transaction, and then redistribute this tax income to holders of the token.
This tax redistribution is referred to as reflections or rewards and it could be in the same or a different token. Most times, it’s in a different token.
Reflection tokens encourage investors to buy and hold (HODL) onto the asset over the long term by rewarding them for their loyalty.
Therefore, the longer you HODL your reflection token the more rewards you accumulate.
How do reflection tokens work?
Reflections tokens charge a tax on all buy or sell transactions and redistribute to current holders of the token proportionally.
Usually, a portion of the tax is also allocated to the team, for marketing, and liquidity. And the entire process is automated and managed by a smart contract.
Some reflection tokens tax only sell transactions, while others tax both buy and sell transactions.
So, the bigger the trading volume of the reflection token, the greater the rewards the holders get and vice versa.
Furthermore, those who bought the token earlier or HODL it longer tend to earn the most reward. This is how reflection tokens are designed.
Moreso, one of the beautiful things about reflection tokens is that you don’t need to do anything to earn rewards with them.
All you have to do is buy the token and leave it in your wallet and the smart contract will automatically credit you with your share of the reflections.
How to invest in reflection tokens like a Pro
Reflection tokens offer you a great passive income opportunity, but unfortunately, many of them are scams.
So, first, you need to find the ones with solid use cases, backed by a legitimate project or team that’s committed to its success, and will not pull the rug on you.
Once you’ve done your due diligence, determine how you want to make money with the token.
Below are the primary 3 ways you can make money with reflection tokens.
- Price appreciation
- Reflection rewards
- Farming rewards
I will briefly explain each of them below.
1. Price Appreciation
The price of a good reflection token tends to increase over time as more investors discover the project and smart old investors continue to HODL to earn more rewards.
However, note that this may not necessarily be the case because the market is extremely unpredictable. So, keep that in mind.
Now buy the token as early as possible and wait until the price reaches your take-profit target then sell, or continue to hold and stake to earn even more.
You can sell everything or just a portion of your total assets. Some people like to sell and take out their original capital with a little take-home profit and ride the rest to the moon or hell.
It all depends on your goal. Do you want to invest in the token long-term or cash out immediately after you hit your profit target?
Your answer will determine how long you HODL and what you do with your token while you hold.
Just make sure you have an exit plan and strategy when you reach your take-profit target and stick to it.
However, if the token never makes it to your profit target no matter how long you HODL, then you have probably invested in the wrong project or you need to consider the other strategies discussed below.
If you want to invest in a reflection token, it’s smart to actually want to earn the reflections, don’t you think so?
Therefore, you want to buy a reasonable amount of the token as you can afford and HODL for as long as possible for the rewards to pile up.
You can decide to sell or hold the rewards as your profit-taking strategy.
For example, with CryptoSorted, you earn BUSD stablecoin reflections just by holding CST in your wallet.
Now, you can decide to hold or cash out your BUSD reflections to fiat as your profit-taking strategy.
If you decide to HODL the BUSD reflections, you can consider finding a way to put your BUSD to work too to earn even more.
Two popular ways to do that are via lending or staking on Venus or Binance.
This way, the cycle of passive income continues and you can build your crypto wealth faster with minimal risk.
Some reflection tokens allow you to stake your liquidity provider (LP) token to earn more of the same or a different token.
For example, you can stake your CST-BNB liquidity provider (LP) token to earn more CST.
You can then harvest your CST farming reward and sell it to a stablecoin or keep it in your wallet to earn even more reflections on them as a profit-taking strategy.
There’re various ways you can play with your rewards and I’m sure you’ll find what works best for you based on your goals and preferences.
PS: I used CST in my examples for convenience only and because it’s our own reflection token optimised to give you maximum rewards and we’re proud of it.
It is undoubtedly the best reflection token out there.
What does a reflection token project need to be successful?
The primary thing that makes a reflection token attractive is the size of the reflections (holders reward) which is affected by trading volume.
The higher the trading volume, the bigger the reflections and the more people would want to buy and HODL the token to earn their share of the rewards.
Volume on the other hand grows with new investors and trading activities.
And investor acquisition depends on strong marketing efforts, real or tangible use cases and project development.
However, one silent factor that anchors all of them is a strong and committed team that’s willing to do everything to make the project succeed and a supportive community.
From the foregoing, you can see that the main factors that ensure the continued growth and success of a reflection token include:
- Trading volume
- User growth
- Use cases
- Committed team + project development
- Supportive community
…all of which are interwoven and feed off of each other.
With these, you can quickly evaluate the potential of a reflection token and see if it’s got potential.
What are the risks of investing in reflection tokens?
The major risks associated with investing in reflection tokens are the team pulling the rug on you or abandoning the project.
Other risks include:
- Token price dumping irrecoverably. This is usually caused by team dumping or unfriendly whale activity.
- Project failure. The project can fail just like any other business due to a number of reasons such as poor management, lack of funding, bad luck, and a host of other potential causes.
- Hacks and bugs. The project can be hacked, exploited, and a bug could render the contract useless. Either of these is capable of causing the project to fail permanently or dump irrecoverably.
Even an overextended bear market or a major global market crisis could crush any project, including a reflection token.
So, take all these into account when investing in reflection tokens or any cryptocurrency project for that matter.
The best reflection token
Undoubtedly, the best reflection token you can invest in with confidence is the CryptoSorted (CST) token.
It ticks all the boxes of what a great reflection token should be and we designed it to be the kind of reflection token we will want to invest in ourselves.
- First, it has the lowest supply among all reflection tokens out there. The maximum supply is 1,000,000, compared to others with a quadrillion supply.
- Secondly, the token is backed by a real project and has multiple actual use cases that enhance its value in addition to the BUSD stablecoin reflections.
- Thirdly, CST offers you real yield, as we use our net revenue to buy back the token to replenish the LP staking pool.
- Lastly, the only way to earn CST is by buying it on an exchange or providing liquidity and farming it. This ensures that inflation is contained and the token will only go to true investors and believers in the project.
Reflection tokens are based on the concept of “hold to earn”, where you’re rewarded just for holding the token in your wallet.
They offer true passive income to crypto investors but not without the risks of rug pull, pump and dump, project failure, hacks, etc. that could easily wipe away your investment.
As such you need to do your own research (DYOR) and try to identify and invest in reflection tokens with strong potential for success and backed by a committed team.
Furthermore, I’ve shared with you the 3 most profitable ways you can invest in reflection tokens which include:
- Buying the token early enough and selling when you reach your profit target.
- Buy and HODL a sizeable amount of the token and take the reflections as your profit in the short to medium term.
- Staking your LP token to earn more of the same or different token as a reward, then harvest and sell the reward token to take a profit.
Of course, there’re many ways you can personalise how you invest in reflection tokens and what your strategy will be, but the 3 above are the most practical.
What do you think about reflection tokens, and which is your favourite? Share with us in the comments section below.