There’s no shortage of optimism in the cryptocurrency and blockchain world – so much so that cold, harsh truth starts to become a rare commodity.
With that in mind, let’s take a sobering look at five truths cryptocurrency investors don’t want to hear, no matter how much they should.
1. In a World of Bitcoin Experts, Nobody Knows Anything
In the cryptosphere, most experts are self-appointed. A select handful of personalities have won the trust of the average crypto enthusiast, but those are few and far between.
The highest rated ICO experts somehow emerged at the same time as the guinea-pig trials that were initial coin offerings themselves. Trusted resources for “ICO ratings” often turn out to be the blind leading the blind, or worse – a self-perpetuating feedback loop where hungry demand from readers inevitably pushes the project ratings higher and higher. Twitter influencers turn out to be nothing more than people with the oldest accounts, who suddenly added “crypto” to their handle.
We spend much of our time trying to discern the true motivations of CEOs and self-proclaimed blockchain leaders, but perhaps we should be trying to discern our own. Many will claim they’re here for financial success, but the fact is the surreal phenomena of clueless blockchain experts and influencers could not exist were it not for the intense doses of “hopium” that summons it.
Leading onto the next harsh truth…
2. You’re Here Because of Emotions, Not Shrewd Financial Acumen
I fully understand the bold, adventurous pioneering spirit of many who are drawn to the crypto space. But just like those pioneers who took to the hills in search of gold during the California gold rush, the quest for profits may come in secondary to the pursuit itself.
In other words, we’re not here because we made the rational decision that this was the soundest way to succeed – it very clearly isn’t. I suspect most are here for the buzz, the dream – the thrill of breaking previously uncharted ground with our picks and shovels and dreaming of what might emerge.
Dreams might be all there are, however, as many gold prospectors in California learned the hard way, while the peripheral industries they relied on took full advantage of their plight.
3. Most ‘Expert’ Opinions are Bought and Paid For
Most of us will have become familiar with the saccharine tone of the crypto press release, which is useful since too few news outlets are honest about which of their articles are paid for and which aren’t.
But what if the same financially motivated deception manifested in the form of comments on message boards, tweets, forum posts, and Telegram groups? Bots have been a hot topic in U.S politics in recent years, and there is strong evidence that much of the cryptocurrency market is swayed by automated trading bots.
However, I’m talking about bots of a different kind: human bots – people who are paid to go out and cheerlead for whatever scam coin is being pushed at the time. Advertisements for these jobs can be found all over race-to-the-bottom freelancing sites like Upwork and Freelancer, and a quick glance at community hubs like the Bitcointalk forum reveals the extent of their outreach.
This isn’t a crypto-specific failing since the same phenomena can be seen in Amazon reviews, as well as any internet-based scenario where someone has something to sell. But it may surprise some first-timers to learn that they really can’t trust much of anything they read online in the crypto space.
4. Decentralization is a Utopian Pipe Dream
You can lead a horse to water, but you can’t make it drink. There’s a giant gap between what we think is good for us, and what people actually want. People will say they want more autonomy, authority, and self-control, but when they realize that such things also require discipline and responsibility, then suddenly decentralization becomes something to be feared.
As echoed in this contrarian article, there might just be a reason why human beings have consistently organized themselves into ranked hierarchies since time immemorial.
I imagine a lone, comedic figure fighting desperately to bring decentralization to the masses, and after painful trials and tribulations he presents his technological saving grace to the people only for them to ignore it, and scoff at his naivety.
5. Crypto is a Bubble: At Least 95% Of All Projects Will Fail
For an analogous situation, we can look to the booming growth in the cannabis stocks sector, the similarities between which produced the line: “Cannabis is the new crypto.”
Just like crypto, the harsh reality is that a vast majority of these stocks will either fail or turn out to be the work of opportunists. That’s the opinion of CIO of Portfolio Wealth Advisors, who told Yahoo Finance last year, at the height of Tilray Inc’s 872% growth:
“Good for you if you bought Tilray. … Good for you if you bought Canopy Growth…But we’ve got another 500 securities out there, and 90% of them are frauds and just aren’t going to make it.”
Yahoo Finance currently lists 24 cannabis stock tickers, while other sources place the number of companies in development at 64. If Munson is correct, that leaves around six firms that might prove somewhat viable in the aftermath of the inevitable cull. As for Tilray, six months on from its peak, the stock price has sunk by close to 65%.
The cryptocurrency space contains 2,068 coins and tokens according to CoinMarketCap, and if the head of global research at Bitwise is to be believed, 95% of them are doomed. Matt Hougan told Bloomberg earlier this month:
“There are 2,000 cryptocurrencies out there: 95 percent of them are useless and will die a painful death. The sooner that happens, the better.”
That means just over 100 cryptocurrencies might make it out of 2,068 – a larger target to aim for than the pot stocks, but also one with a greater chance of failure. Here we have the very definition of a bubble, with everyone trying to catch before it pops. However bubbles aren’t all bad, and according to the Bitwise research leader, the bubble may help in the long run:
“It did the same thing that happened with the internet, which is it attracted a huge amount of talent. It did bring a lot of capital and interest in development to the ecosystem…”
Looking back to Tilray Inc, despite sinking for the last six months its valuation is still 349% higher than it was at the commencement of its $17 per share IPO. Hougan leaves us on a positive note, looking forward to what might emerge from the cull that wipes out 95% of the altcoin market.
“But from those ‘ashes’ will emerge important things. Just like from the dotcom ashes emerged Amazon, Google, and Facebook etc.”
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.com.
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Last modified: March 4, 2021 2:53 PM