On my last couple of articles I’ve taken the discussion away from Price and Volume, as I wanted to focus on the underlying infrastructure and governance nature of cryptocurrency. I believe it was worth it, as we really need to understand how this new distributed organizational model can be applied to most businesses today. More, however, if we do not make an effort to learn the subtle difference between decentralizing infrastructure vs decentralizing governance, all this cryptocurrency madness might end up blowing all over our faces.
After all, what’s the point of having a decentralized infrastructure if power remains with the few and not the many?
–this article shouldn’t be taken as financial advisement as it represents my personal opinion and views. I have savings invested in cryptocurrency so take whatever I write with a grain of salt. Do not invest what you cannot afford to lose and always read as much as possible about a project before investing. Never forget: with great power, comes great responsibility. Being your own bank means you’re always responsible for your own money—
Volume has risen and so has price. Bitcoin is testing new support levels around USD 9000 with the increasing adoption of segwit and the successful ongoing launch of the Lightning Labs LN’s mainnet; EOS already reached record highs in price and Ethereum seems to be getting more traction with the ongoing development of its PoS Casper protocol and, more recently, due to the possibility of applying database sharding technology into its core protocol.
New developments were also announced in mostly all top-10 or 20 coins.
Ripple, Neo and Stellar for example, had important partnership announcements during the last couple of months.
Ah, let’s not forget dear Verge! For the ones who do not know this, the porn industry is a massive catalyst for new technologies. Online purchases, credit cards or on-demand videos were all pushed into the market by the porn industry. Do a little bit of research and see for yourself.
Cardano’s IOHK claims they have successfully created and validated the math and the algorithm behind a PoS system that is as good as, or even better than, the current Bitcoin PoW.
I’ve seen this claim so many times, yet, Bitcoin is still king. For example look at Bitcoin cash; due to the higher block size it manages to have faster and cheaper transactions. Isn’t that the dream?
Nope. Because Security > Speed.
The most secure and resilient ledger will always be the one that enjoys most miners, users and developers support. Following this line of thought, we might think there is a correlation between all these amazing positive news and short-term price movements.
What drives price then? Is it Ledger security? User adoption?
Do not think, for a second, any of the news, developments, announcements or updates I mentioned have anything to do with price and volume. Want to know why price rose? Because new smart-money entered the market.
It’s neither security, nor speed, or the delta in the number of users in the network that is making price rise and fall. Whenever you think the market behaves rationally, consider the following: how many of the top-10 projects have a working and secure protocol? I’m not talking about a nice and friendly platform that does this and that, but an actual decentralized and secure protocol?
Ok, now think of one that’s not just a copy of the Bitcoin blockchain with a “super-feature” making it faster/cheaper/private/etc.
Do not take this the wrong way.
–I am an investor myself and I all I dream is for the above projects to succeed. Having that said, I must push emotion aside, like the attachment I have for the money I’ve put in, and consider how to best ride this complete irrational and dubious market–
Something we all must understand is that irrationality doesn’t mean you will lose money. Or that the market will crash. If only a handful of projects alive today deliver upon their promises, I can assure you the impact on our daily lives will already be massive.
We must realize we are a minority, in a sense that the rest of the world has not awaken to the true power of decentralization. Yet.
So far, the most competent and higher achievers on this front, which is the only that matters at the end, are Bitcoin and Ethereum. The first because it’s still the most innovative project over the last decades; the very initial P2P digital cash and money storage system in the world, continues to be number 1. The second because it allowed for the cryptocurrency world to flourish by creating a framework for businesses to easily integrate decentralized infrastructure and governance onto their business models. An open and permission less protocol for smart-contracts where most tokens live, as all ERC20 tokens were created over the Ethereum protocol.
Take a deep breath and heed this: more than 90% of the entire market exists in-between Bitcoin and Ethereum, by either living of it or by being a copy of it.
What’s the point to all this?
One and only: as investors we must realize how immature, irrational and manipulated this market really is. The potential reach of each technology, project, idea, consensus algorithm or whatever you think is key to be number 1 (to me, it is resilience), matters nothing at this stage.
Usability matters nothing.
Having an actual product or platform matters nothing.
Having total control or being completely decentralized neither.
The only thing that matters is sitting and waiting for prices and volume to be low; that’s when the night comes and the smart-money goes hunting:
like a beast, slowly stalking its prey, patiently, never rushing. When the time comes, you’ll see it. Sprinting, furiously smashing the weakest as it mercilessly craves its blood-thirsty teeth onto the last few remaining sell orders that were trying to push down the price.
In the tiny span of 3 hours, USD 2b entered the market which inflated the overall market cap valuation in about USD 30b. If you’re still trying to pinpoint the reason(s) for this massive run-up let me ease your mind with a game.
Do you remember “Would you rather”?
Imagine you’re a billionaire, millionaire, manager of some huge investment bank, pool or fund. One big whale with loads of fresh cash to put into cryptocurrency.
- Would you rather make an announcement on social media saying “hey guys, I’m going to put a bunch of money into (whatever coin) because of (whatever reasons)” or,
- Would you rather buy a bunch of some cryptocurrency and days later release some news saying “hey guys, I’m going to put a bunch of money into (coin you bought) because of (whatever reasons)”
The cold harsh truth is that most of us are sheep, silently waiting in the slaughterhouse. How can we potentially avoid getting destroyed by smart-money, then?
Look at the future but learn from the past
Last year market cap increased 276% from mid July 2017 to the 1st of September 2017. The year before the run-up happened during June 2016 although it only increased 36% before crashing.
The overall picture tells us the market is still growing and we might see large volumes of USD coming into cryptocurrency, as we approach the northern hemisphere summer season.
My advice is to prepare yourself by disregarding most news, checking some weekly TA analysis from hacked and, most importantly, looking into google trends.
No one can predict how prices will behave, but I really don’t remember the last time there was a massive inflow of money and prices remained stalled.
When smart-money comes pouring into the market, 2 things usually happen:
- Prices spike and new highs are achieved,
- Dumb-money loses as it enters too late.
If you do not believe me remember what happened after all summer run-ups.
Last modified: March 4, 2021 5:07 PM