Hey everyone,
Hope you’re doing well!
Happy Lunar New Year to our Chinese readers & everyone celebrating it!
Amidst the festivities, the crypto market hasn’t been doing well of late but here’s some food for thought:
Are the different crypto blockchains fundamentally worse off the last time we saw these prices? i.e.:
I think (just my views) the current ‘weakness’ in prices is due to macroeconomic factors (eg. slowing economic growth & governments tightening financial support)
So is crypto here to stay? I think so.
Let’s take a step back to think about it.
For something (eg. a technology, an ideology) to truly scale worldwide and grow really big, it has to appeal to the everyday person, the masses, and not confined to certain demographics only.
Because of the nature of its underlying technology, crypto has brought about many useful applications that are much sought after in the age we live in. It’s immutable, verifiable, transparent, decentralized, scarce, digital and allows user anonymity.
These characteristics have given birth to some useful applications like decentralized finance (DeFi), non-fungible tokens (NFT) and decentralized autonomous organizations (DAO). These 3 alone could already help solve a lot of the issues most of us face everyday on Earth.
DeFi provides a way for the unbanked to preserve wealth, build wealth, access loans and lend their assets in exchange for interests.
NFTs enables authentication, proof of ownership and even easy fractionalized ownership of assets. Anything that needs to be proven its authenticity or ownership can be an NFT. Digital art and in game NFTs are just proving it can work.
DAOs give people the power and avenue to make decisions in a transparent and decentralized way. No rigged elections and no one centralized power to make key decisions to affect an outcome in their favour.
The path to price appreciation
Crypto is similar to a social media platform whereby its value is derived from the number of users using it. It’s called the network effect.
A great crypto network brings more users which bring more builders coming into build more products and services and the cycle repeats.
This leads to more transactions and the value of the crypto increases with increased demand coupled with a limited supply of crypto tokens.
What are the risks?
Well, if we need an internet connection to access crypto, that means if the internet was shutdown, we’d be unable to access your digital assets.
However, because the proof of ownership of your assets is immutable on the blockchain, no one can take it away from you unless they gain access to your crypto wallets. So, all you need to is to go somewhere with internet access.
Because of its decentralization, you’re now responsible for your own crypto and digital assets. If you lose the password or back up seed phrase to your crypto wallet, there goes all your money never to be accessible again.
So either we find a way to keep our passwords/ back up seed phrase safe or we trust a centralized exchange (like Binance, Gemini, Kucoin, FTX) to provide custody for our crypto and digital assets.
There are many crypto coins/tokens out there and sadly not all will make it because if there’s no growth in users, it will eventually fade away.
So, as investing goes, always do our own research and determine for ourselves if a crypto network is worth investing in. I try to ask myself these questions when evaluating:
What problem are they trying to solve?
Does the solution make sense?
How do they measure up in terms of security, scalability, transaction speed and transaction fees?
I’m inclined towards the idea that there will not be one sole winner in crypto but multiple winners for different use cases that will be adopted mainstream. The total addressable market for crypto is huge - from finance to real estate to art to gaming to governance just to name a few. So, I’ve also been looking at crypto projects that enables inter-operability between these different crypto networks.
Conclusion
So, I’d say that there seems to be a mispricing of crypto right now in this current market condition given the growth that is taking place.
However, I do not know if prices will decline more from here in the short-term, but if we zoom out to a longer time horizon and investing with money we can afford to risk, I think the rewards outweigh the risks long term. Do your own research and see if you end up with the same conclusion as mine.
I’d share more about what I’m doing with my crypto assets in this current market environment in a future post but if you’re new and don’t know where to start, I’d suggest opening an account on a crypto exchange.
I’ve compiled a list of resources to help you if you’re new here (some of it are referral links, feel free to use them or your own)
Take care,
Justin
I think crypto & blockchain is here to stay because it is good for authentication, immutable record keeping, proof of ownership
If you’re not yet into crypto yet, I think a good way to start is by buying stablecoins.
As I’m in Singapore, I like using Gemini Exchange, FTX & Kucoin.