Hey everyone, it’s Whatever Wednesdays again. Today we’re going to talk about “Where’s the Bottom for Crypto?”

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Where’s the Bottom for Crypto?

It’s been in a little while since I’ve talked about crypto… but it’s been pretty bad out there, for just about everyone. Remember how I said that we probably wouldn’t see a real “crash” but a slow bleed out? Well, if we zoom out, you can probably see that this slow bleed was pretty much all of 2018.

Why is this happening?

The answer isn’t too hard to guess. Crypto doesn’t have a good use case yet. It hasn’t been able to provide any true real world value and is currently valued on speculation. However, even I was surprised by how much the crypto space as whole has continued to bleed this year.

My quora answer about Cardano which I wrote earlier this year suggested that the my hypothetical bottom for Cardano would be about 5 cents. Now that Cardano is sitting at around 6.5 cents, it’s hard to wonder just where the bottom is. Cryptocurrency is virtually impossible to attach value to since it doesn’t have a great real world use case yet. The people in the space seem to understand how powerful the technology is, but the space as whole has gotten ahead of itself. This will seem like beating a dead horse, but we’ve been through this before with the internet bubble.

What if crypto isn’t the next internet?

It’s possible. Perhaps it isn’t the next internet. To be honest, I don’t think crypto is the next internet either. I actually believe that the technology has farther reaching implications than the internet does. That may seem ridiculous to some, and maybe I’m just a dreamer, but I’m not the only one. I believe that cryptocurrency will see mass adoption in my lifetime, and I think it will take less time than the internet to gain mass adoption.

However, times like these make you question if you believe in things or not. Remember that cryptocurrency as it is currently is a huge gamble. It’s not like playing roulette or blackjack at the casinos, it’s more like playing the lottery or betting on horse races. There are really good projects that are doing good work. However, the same could be said for many companies during the dotcom boom that “didn’t make it” through. However, their efforts weren’t in vain. The internet is what it is today because of the work of many to make it that way.

Are there other catalysts?

Yes. Nothing huge, but enough to push people to lose faith and sell (even at a loss). It’s a lot of little things.

ETF Denials

For example, Bitcoin ETFs keep getting denied. The idea that a Bitcoin ETF would bring legitimacy to the world of cryptocurrency and enable institutional investors to dump money into the space drives speculation. Their recurrent denial makes people think that institutional money may never come in. While possible, I think it’s unlikely. Cryptocurrency is space where money is. As long as institutions are in the business of making money, they will find some way to enter in. However, the regulations aren’t in place to allow for it — yet.

Possible Fake News

Another example is news can get blown out of control, or just be fake. For example, Business Insider reported that Goldman Sachs was halting its plans to open a crypto trading desk in its headline. However, this information was from “unnamed sources”. Once again, seeing a big institution back away from crypto hurt this very thin market.

Then Goldman Sachs Chief Financial Officer Martin Chavez called a report that the bank was ditching plans to launch a cryptocurrency trading desk “fake news.” – cnbc.com

The Cult of Personality

A third example is when you have a recognizable face or “hero” in the space who seems to have lost faith. Vitalik Buterin, the founder and considered leader of Ethereum was quoted as saying:

“If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn’t an opportunity for yet another 1,000-times growth in anything in the space anymore.”

Additional quotes were: Buterin told Bloomberg that the rapid growth of crypto and blockchain industry is now reaching a “ceiling,” and is moving from “just people being interested” to the stage of “real applications of real economic activity.”

Also, we must remember that these markets are paper thin, and whales can manipulate the market pretty easily. We’re all just krill. Even if you make a profitable trade 9 times out of 10, the 10th one could wipe you out.

So then, how long will you hold?

Like I’ve always said, I don’t have that much $ in cryptocurrency. It’s just to have some skin in the game and to keep up with the space. That said, I was fully prepared to lose 100% of what I’ve put into the space so far. For those wondering, I still only hold two coins, Ripple (XRP) and Cardano (ADA). Right now, they’ve both doing poorly for all of 2018, as is the rest of the altcoin space.

If you look at athcoinindex.com which lists the all time highs for cryptocurrencies, you’ll see that XRP is down -93% and ADA is down -95%.

Can you imagine buying at $1 and having it be worth 7 cents or 5 cents because that is what XRP and ADA are at if you had bought at the all time high.

Painful.

Please, please understand that cryptocurrency is gambling. Only invest what you can afford to lose.

However, my plan was not to sell anything until 2025 anyways, mostly as an experiment. In my mind, it’s no longer “my money” it’s “money in crypto” that I may or may not get back. That said, having some skin in the game has made me motivated to stay educated on what is happening in the space. I’ve also read a few books now and I’ve learned a lot about the history of bitcoin and cryptocurrency.

For those interested, I signed up for Consensys’s free Cryptocurrency course on Coursera. So far it seems pretty good. Consensys supports the development of applications on Ethereum.

So what’s going to happen?

My feeling is still the same. There are too many cryptocurrencies without good teams or reasonable use cases. This would be similar to back when the dotcom boom had too many dotcoms and no way to actually generate value/profit. This year long bleed will see the death of many coins. In fact we may continue to see cryptocurrency  as a whole see another bear market for another year. However, as long as there is value (and I think there is), there will be coins that survive and provide real world use cases and real world value.

Could I be wrong?

Sure. However, it’ll be an interesting ride.

TL;DR

Cryptocurrency has seen a really bad bear market for this year.

Where’s the bottom? Who knows?

Will this bear market continue for all of 2019 too? Maybe.

However, I still believe there is value to be had. It’s just a matter of when — and which.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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