What’s the wildest crypto price speculation you’ve ever come across? Safemoon to $1, Shib to $0.1; bitcoin to $1 million. The latter is realistic in the long term. Long-term here is complicated, but don’t worry…your favorite Twitter influencer said: “very soon”.
Bitcoin to $100,000 before the end of 2021 didn’t come to life. Many things to blame here though. I did agree with the speculators, I guess we all failed here. I’m still bullish regardless. If we have to go by mathematics, we were en route six figures for one bitcoin. The bull run wasn’t a poor one, even though the bears took over in a very bad way.
The past run saw most cryptocurrencies hit new highs. Your influencers’ ridiculous predictions didn’t work out but in essence, you made huge gains if you bought in early enough. Depending on when you got out, this run made many millionaires…and billionaires! Ethereum was inches close to $5000, a little scratch and we’d have seen bitcoin trade above $70,000. The market as a whole hit past three trillion dollars in valuation. Mind-blowing if you consider how far we’ve come.
Many projects reached well-deserved values. Ethereum’s run was well deserved; considering the fundamentals and the fact that it remains the most innovative project in this space. Bitcoin at $70,000 wouldn’t be a bad view, considering its position in the political and financial aspects of the world outside blockchain and cryptocurrency.
Those two apart, the majority of other price moves were rather ridiculous and any onlooker would ponder the basis behind this move. The whole space hitting three trillion dollars in valuation would also raise eyebrows.
The top 100 cryptocurrencies had a total capitalization of at least $800 million each. The normal idea is that valuation is relative and many factors come into play, but a look at these projects commanding hundreds of millions and billions of dollars brings up many questions. For a sector with thousands of projects claiming to solve certain issues and introducing at least one token to the market; the top 100 positions are filled with projects solving almost the same issue.
Smart contracts, NFTs, memes, exchanges, and payment solutions; about 80% of the top 100 projects fall into one of these categories…well, most of the projects in the space. But thanks to hype and market manipulations, these projects have reached ridiculous prices and the whole space has blown up in value over the past few years.
Apart from the proliferation of almost the same concept, many of these projects are still ‘inferior’ to the mainstream concepts they are trying to optimize with decentralized technologies. Security and immutability which these projects portray as one of their biggest virtues are found lacking in many cases. Hacks and breaches are almost as popular in crypto as in other sectors not using some ‘complicated computing protocols’. You’ll wonder why these projects continue to reach ridiculous valuations – hype that’s your answer.
Hype marketing has played out well for a good number of cryptocurrency projects. Well-planned shills by a group of people could create thrills and lure potential investors into investing in a project despite having no clear information about the project. These projects sometimes involve prominent cryptocurrency influencers and mainstream celebrities creating these shills. If done well, hype marketing could override utility and push a project to tangible price levels regardless of the proper utility it presents. This growth despite being organic is built on ‘unverified beliefs’ and bloated utility.
Utility tokens? Well, if these tokens are really ‘vital’ to the functionality of the system is also arguable. Project teams struggle to create an extra use case for their tokens; in essence, their technology can work equally well without the tokens they minted or created. Trading these tokens in a volatile market is the most enticing use case.
Many of these projects valued in hundreds of millions are yet to develop a working product. They have built their fundamentals around a bogus whitepaper, an army of speculative investors, and a gang of ‘shillers’ with thousands of followers. Investors’ biggest attraction is the previous price gains and the speculated price. 100X from here! But why? Well…
Once you get off your delusion of getting rich quickly with cryptocurrency; these facts get even clearer. Blockchain technology is having an amazing time, with huge additions to its capabilities and the future looks bright. It’s almost the same for cryptocurrencies but unlike blockchain, I can’t see a very convincing reason for this; apart from human behavior.
If cryptocurrencies are overvalued? I’d say Yes and No. No, because several really good projects are deploying impressive solutions on the blockchain and creating real utilities for their tokens. Elsewhere, the case is different, Yes, tokens like this are overvalued.
The market is a wild one, but still sensible in a way. These overvalued tokens are the first to take a huge nosedive when the market goes the other way. On average, cryptocurrencies are overvalued. With the current state of things; the crypto space wasn’t deserving of a three trillion dollars valuation.
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