Wait a minute — Quick 360, no scope
When in doubt, zoom out.
Needless to say, it’s a mess out there. The very companies thought to be the foundation of the industry are crumbling, what a surprise.
The main takeaway ? It’s healthy for the industry. There’s no such thing as too big to fail in web3, and that’s a very good sign for the future. This also means that there will be more blood in the streets — and I’m deeply sorry for anyone who lost their life savings to those who gamble and steal.
Innovation and events are so intense in blockchain, that we tend to lose sight of the important information.
Let’s situate ourselves in a more macro perspective, and hopefully people stop chasing the laser dot on the wall.
BTC Cycle
We’re still ~1.5 years away from the next halvening.
Generally, the cycles last for a bit less than 4 years. The reason why, is that Bitcoin halves the award for mining a block every 210'000 blocks. Bitcoin’s software adapts the complexity of the proof of work puzzle, in order to keep the time needed to mine a block at around 10 minutes.
24 hours x 6 ~= 144 blocks mined per day → 210'00 / 144 / 365 ~= 4 years
Last halvening happened in may 2020, and historically, the bottom of the bear market is registered between 1 and 1.5 years before the next halvening. Which would place the bottom between now and february of next year — which matches what we’re seeing.
Normally, we could expect the market to anticipate that, and try to onboard before people onboard for the bull market. Which was thought to be enough to make the market stable until the next bull run.
That was without counting on macro economic factors, wars and FTX-style black swan events.
Regulations
The market might seem erratic, but it’s becoming stronger and more stable, as a direct result of all these scams and crashes.
As an example, Switzerland has developed — or adapted — an amazingly comprehensive legal framework to deal with every aspect of blockchain.
Taxes, legal requirement for financial institutions, custody, safety requirements, types of digital assets, due diligence methods and limits, fiscality of tokenization, and so on. As a matter of fact, Switzerland is so advanced in its legislation around digital assets, that a lot of other countries use it as an example.
The US has also made it quite clear they’re planning on controlling what goes on in the crypto markets, and rightfully so. They know they can’t stop Bitcoin, so they have all the interest in the world in building the infrastructure needed to accommodate it and benefit from it — ergo, they’re buying the dip.
Most big exchanges are coming forward, promoting more transparency and less control over client’s funds. The new trend is the Proof Of Reserve, it shows the reserve but omits the liabilities. It’s still better than nothing, though. The less greedy and simpler your exchange is, the more people will trust you.
More regulations is good, despite the volatility it creates.
Macro
If you’re reading this article, you’re probably kind of economically literate, or at least trying to be, like myself.
You also know it feels weird when people say that the bottom is in. You know that the effects of the war in Ukraine have just started to surface. You know that the effects of the rising interest rates haven’t settled in. You also know that FTX bankruptcy will ripple for months, domino after domino, and that the market is heavily manipulated because it’s the Mordor out there.
Those who want you to rush in now, need you as a liquidity exit. Don’t fall for it.
But you never know when BTC will decorrelate, so DCA. NFA. OMG. TMA. (Too Many Acronyms)
When people say that rewards are relative to risk, that is what it means. A very new industry, where opportunities to make money and lose it all are legion.
Even worse, these drawbacks bring everybody to the hedge. Getting margin called is no joke, especially when you’re over-leveraged. Moreover, it seems fair to assume that “they” will need to liquidate positions to pay back loans and/or top-up their collaterals.
Which means it’s probably going to get worse, before it gets better.
Winter has knocked
So now we’re getting to the really interesting part.
When people say “90% of blockchain projects will fail”, they’re not kidding. It might be 85%, 95% or 70%, it doesn’t matter. What matters is when it starts.
At the time of writing, on Coingecko, there are 43 crypto with a market cap over $1 Billion. Three of these projects are Dogecoin ($11.8 B), Shiba Inu ($5.3 B) and Crypto.com’s CRO ($1.7 B), who’s also rumored to have liquidity issues.
Not to say that these projects are good or bad, I just think that if you need to chose what to sell between Bitcoin, Ethereum or any of the 3 above, the choice is easy.
Bad projects will eventually fail. Not to mention the really good projects that just won’t make it.
Real winter will see these projects REKT. Smart money is liquidating to buy Bitcoin now and until early 2023. At the bottom, right before all the finance guys use their bonus to buy Bitcoin. But be wary of this over-simplification, if everybody expects this to happen, they think of buying just a bit before that, and you keep up the logic only to FOMO in right now.
But there is no liquidity available since everybody needs it to function and pay their debts, with rising interest rates and a deep feeling that the global peace era is behind us — does it sound like I had too much coffee ?
Concluding thoughts
Everything has changed, but nothing did.
It’s the same history. Bitcoin is dead. No, it isn’t. Yes, it is. No, it isn’t.
The real questions are :
- Is it stoppable ? Not really.
- Can governments benefit from adopting it ? Yes.
- Can you legislate around it ? Yes.
- Does it serve an actual purpose ? Absolutely.
- Do wealthy people want some ? Ask around you.
The best way to keep your money is to get used to let “27x opportunities” go by. Not that there aren’t any, there’s plenty of them. It’s just that you’re more likely to hurt yourself chasing for them.
You might like what 5–6% APR in ETH, + valuation, look like in 10 years — who knows ? NFA.
News go by at a crazy rate. We’re so close to every news, that we forget the ones we heard about a few weeks ago, but they haven’t disappeared. Their effects are still a reality.
So…
