Crypto keeps falling | Business


Bitcoin and other cryptocurrencies are notoriously volatile, typically suffering large drops of 50% or more. This does not seem to bother too many staunch believers in cryptography, who have become accustomed to declines of this magnitude. They simply use rejections to buy more. Still, there are still many people in the space reminiscent of the “cryptographic winter,” the period between early 2018 and mid-2020 in which prices dropped and stayed, and much of the innovation in cryptography has stalled.

So the question is: what do we do with the recent spin-offs in space, with the Bloomberg Galaxy Crypto index down 60% from its peak in early November? Does this mark the beginning of a new, long winter after a short spring, or is it just a refreshing break? While selling on cryptocurrency may not be as big as others in its history, it feels worse because the market has grown so big, to the trillions of dollars. The damage to cryptography has been extensive, with hundreds of coins falling 90%. Bitcoin, the largest and most well-known cryptocurrency, has not done so badly, but it is still down a painful 56% from the peak.

At the top of the bull market last year, there was a lot of arrogance, laser eyes, CryptoPunk avatars and rude behavior to accompany the Bitcoin conferences. All this was a sign of the difficult times to come. Countless cryptographic skeptics have ended up at the bottom of a Twitter channel for suggesting that the bullish market had bubble features. One speaker at a recent conference I hosted was a former Ethereum miner. He talked about the cryptocurrency winter and, in the midst of the carnage, bet that virtually every dollar the cryptocurrency had would recover, buying more and more GPUs to undermine Ethereum when prices went up. They finally did, but revealingly, they are no longer in the mining business of Ethereum, reusing their equipment for cloud storage.

Most smart people agree that the blockchain technology that underpins cryptocurrencies has enormous potential, even though we don’t really know what it will be like in ten years. Venture capitalists create it, and have been making numerous investments in Web3 (decentralized internet) and receiving tokens in return. Big fortunes have been made on non-fungible chips or NFT. But the value of all these assets has been decimated in recent months.

If you think about the normal cycle of technology investment, the fall in dot coms that began in 2000 and ended in late 2002 deterred venture capital investment for almost a decade, to the point that its best ideas were FarmVille and the strange clean technology. Large VC companies have raised a lot of money for cryptography in the last year and the returns will be abysmal for a long time. That is normal. Whenever an asset does not generate cash flow or profits, valuation is based on trust. Sometimes we feel good about these assets and other times we feel bad. You are viewing this game right now on the stock exchange. The actions that have been most affected are those that lack fundamental fundamentals. This is what makes investing in cryptocurrencies so risky.

In previous bearish crypto markets, people were wondering if Bitcoin would recover. Now, they are asking out loud about the future of the blockchain in general. There should be no doubt about the unlimited potential of this technology. If you have a crypto basket today, as I do, it will probably be worth a lot more in the future. But the more so and when is the question no one can answer. Crypto will have another winter, but from that neglect will grow another bull market, led by a handful of cryptocurrencies that will grow far beyond what exists today.

Sometimes trust goes away for a while, but it always comes back.

Maybe instead of Web3 and NFT, it will be a different technology that captures the imagination. However, it’s worth noting that many dot com bust survivors have become spectacular winners, including Amazon, Facebook and Google, and even eBay. Capital markets are a giant sorting machine, filtering out bad ideas and rewarding good ones. So when people ask if the cryptocurrency will return, the answer is yes, it will absolutely return, but 98% will not.

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