Market Correction a welcome opportunity to look beyond the hype
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner” Adam Smith, Wealth of Nations 1776
It is with a mixture of relief and expectation that I greet the downturn in cryptomarkets in the last two weeks.
Pricing and market dynamics can usually be explained by the law of supply and demand. Cryptocoins have enjoyed a remarkable rally of late which is demand driven by the massive support for ICOs, a steadily growing cryptocommunity, transfer of token value by cryptocurrency holders to new coins and last but not least speculators many migrating to cryptomarkets from traditional channels of fiat currencies, commodities or equity. All of this has been positive and long may it continue, but the effect of the current hiatus or correction in the market including the extent and duration of the same, remains to be seen.
If we look at the chart above, we can see a sharp rise in valuations this year until June 23rd. Since then there has been a pronounced fall in the global market cap trend, although valuations still represent a huge increase in the market over the last year, six months or 3 months for that matter.
One stand out element of the above chart for me is the massive increase in market volume in the last three months. This is an indicator that there is a lot of activity right now in a cryptomarkets with exponential growth in such a short period. The salient point here is not the correction rather that this increased volume is here to stay and is on the rise. A market with volume is an indicator of a healthy market and leads me to believe, that despite the latest correction, the demand for cryptocurrency will grow, with the consequential increase in market valuations trends.
If we apply the lifecycle adoption model to the cryptomarkets we could say we are moving from the innovator to the early adopter phase which means considerable room for growth in the coming years, see chart below:
So why am I relieved? In my last post as Project Manager at ACT I spoke about, among other factors, liquidity and market size as being essential elements of an ICO. But what about after the event?
“A well-designed token increases in value along with the network. It incentivises the community and early adopters to use, participate, spread and evangelise the platform that it represents. This bootstraps a global community where everyone shares incentives to make the project grow and succeed.” Jan Isakovic, Cofound.ie
The key to token valuation in the long term is how integral the token is to the platform’s operation and the ability of the venture to create on-going earnings. Participants tend to forget the fundamentals when there is a significant rally, which is fine, but the market tends to put things into perspective and thanks to the recent corrections we should now enter a period of enhanced appraisal of ICO candidates.
ACT will use the funds from the ICO to reach out to communities throughout the world to be active on our platform with proposals, curation and voting, which will increase as success stories and testimonies come back from the field. Token holders are our community and intrinsic to how we operate ensuring a long term perspective and positive outcomes for all involved. Because of the need to hold tokens to participate in ACT we expect a continuous demand for tokens as the platform and community grow.
The transparency, clarity and open governance that Blockchain based smart contracts on Ethereum provide, will facilitate a game changing application to support social accountability throughout the world.
At the beginning of this post I mentioned demand as the key to market ascendancy. The success of ACT is synonymous with increased demand and use of ACT Tokens. We have devised a formula that ensures demand, encourages active participation, and delivers value for all stakeholders.