You will sort five crypto assets into categories by what, if anything, supports their price.
Open the markets page of any crypto exchange and you will see hundreds of names in one long list, sorted by price change or trading volume. Bitcoin sits beside a dollar stablecoin, which sits beside a token launched last month with a dog on its logo. The list treats them as the same kind of thing. They are not, and this exercise is where you learn to sort them yourself.
You will take five crypto assets and place each one in a category by what, if anything, supports its price. Allow about 20 minutes. Use a spreadsheet or a sheet of paper with five columns: asset, category, what supports the price, what would make it fall sharply, and source.
These come straight from the lessons in this module.
Native coin: the coin a blockchain uses to pay its own fees and reward the people securing it, like bitcoin and ether. Its price rests on demand for the network and for the coin. Reserve-backed stablecoin: a token whose issuer says it holds cash and short-term assets to redeem every coin at its peg. Algorithmic stablecoin: a token that tries to hold a peg through code and a linked token, with no pile of reserves behind it. Utility or governance token: a token used to pay for something inside a product, or to vote on a project's decisions. Meme token: a token that exists mainly for fun, community or speculation, and says so or barely pretends otherwise.
Some assets sit between two categories. When that happens, choose the closer one and write a note explaining the overlap. The point is to make you look at what holds the price up, not to win an argument about labels.
Start by picking a mix. Include bitcoin or ether, at least one stablecoin, and at least two tokens you have actually seen promoted or seen friends talk about. If you hold any crypto, include what you hold. You do not need to buy anything, and this exercise does not suggest you should.
For each asset, find the project's own documents. For a native coin, that is the project's official site and technical documentation. For a stablecoin, find the issuer's site and its latest reserve report, as in lesson 2.2, Stablecoins: what holds the peg and what breaks it. For other tokens, find the whitepaper and the page setting out supply and allocation.
Avoid social media threads, video summaries and price-tracking sites for this step. They are useful for spotting what people are talking about, but they repeat claims without checking them. A summary that says a stablecoin is "fully backed" is not evidence that it is. The issuer's reserve report, read with the questions from lesson 2.2, is the nearest thing you will get.
Here is a worked example using three assets the course has already covered, so you can see the level of detail to aim for.
Bitcoin goes under native coin. What supports the price is demand from people who want to hold it, with a fixed supply schedule and no cash flow, as covered in lesson 1.3, What gives bitcoin a price, and why it swings. What would make it fall sharply is a broad loss of demand, for example through a change in sentiment or regulation. Source: the bitcoin project's own documentation for the supply rules.
Ether also goes under native coin. What supports the price is demand for using Ethereum, since every transaction needs ether for gas, plus demand to hold and stake it. What would make it fall sharply is users moving to other networks, a serious flaw in the protocol, or a general fall in demand for crypto. Source: Ethereum's official documentation.
TerraUSD, as it stood in early May 2022, goes under algorithmic stablecoin. What supported the price was the swap mechanism with Luna and confidence that it would hold. What would make it fall, and did, was heavy selling that the mechanism could not absorb. Source: the project's own documentation at the time, read alongside lesson 5.1, Terra and Luna: a peg held up by an algorithm.
Notice that each "what would make it fall" line names something specific. "Market risk" is not an answer. If the risk is that the reserves might not be there, say that. If it is that insiders hold half the supply and can sell next quarter, say that, using the questions from lesson 2.3, Tokens, DeFi and the questions to ask any of them.
This step is easy to skip, and it is the one most people learn the most from. For each asset, add a line for any claim you could not confirm from a primary source. Perhaps the reserve report was months old, or the supply page did not say when the team's tokens can be sold, or the project's documents did not name the people behind it, and each of those gaps gets its own line.
When you have finished, look across the column of gaps. The assets with the longest list of unverified claims are usually the ones being promoted most loudly. That pattern is worth remembering when module 5 turns to the firms that failed in 2022.
Five rows, each with a category, one or two sentences on what supports the price, one sentence on the biggest risk, a source you could hand to someone else, and a note of anything unverified. Start with the asset you know least about, since that is the one that will teach you the most.
Complete the classification table for five assets with your source for each and one sentence on its biggest risk.
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