A Lesson and a Reality Check in a Crypto Crash

I am not exactly sure where it comes from. Perhaps I am a bit of a skeptic by my very nature. But I have a tendency to observe things from a different perspective than most people I know, and I ask a lot of questions.

I am not complaining about this, by the way. Over the years it has served me quite well, especially in terms of financial matters.

I guess part of it, for me, is that I have always been a bit of a forest for the trees kind of guy. I want to always take a bit of a step back and observe the macro to give me more insight into the micro.

Take this morning's crash or correction in the crypto markets for example. It could be both depending on your perspective. But something strikes me about this as I take that step back.

Where are the true crypto believers, and what do they actually number as a percentage of the whole?

Think about this for a second if you will allow me to elaborate.

One thing we know is that as of right now the percentage of the world population that even owns any crypto at all, regardless of what coin they hold, is about 4%. That is a very tiny number. Granted, we are talking about 320 million people. But with a world population of nearly 8 billion, this is tiny compared.

Of that 4%, who are the true believers? Those who have invested in crypto currencies for the long term, and who truly believe crypto is the future. Not a possible one. But the future.

I think this is key. Because these people, the true believers, would not be those who pull out of the market for any reason. The market "selloff" is telling to me of one very important thing.

The true believers are a VERY, VERY small number of people. It may even be less than 1%. In fact, I think it is less than 1%. We are talking a tiny fractional percent of true believers.

What is it that makes me think this?

The question one has to ask is this. Where did the money go? When the market corrected, where did it go? The money. Where did it go?

Look up and down the line and what you see is red all over the place. Doesn't matter the coin. Bitcoin, Ethereum, Dogecoin, Solana...they are all down and down a lot. So again, where did the money go?

I will tell you where it went. It went out of crypto and into fiat. It's that simple. Because if the money was simply moving around within the crypto markets there would be other areas less impacted by the steep drop of the big coins. People would simply be out of one and into another.

Granted, that is a bit of a simplistic idea. But what about the stock market can be compared to what just happened in the crypto markets? When the stock market has a major correction where does the money go?

It goes into cash. It goes out of the markets and into cash. And the same thing is true of where the money went this morning. Out of crypto and into fiat.

This is telling to me of the reality of where crypto is actually positioned right now, and may be a good time for anyone who is a true believer to also take a step back and reevaluate the real future of crypto. Because it can't have it both ways. You can't have only 4% of the population buying into crypto, and of that 4% maybe have 1% or less truly believing in it, and think that fiat is headed for the dustbin.

This is not to suggest that what I am saying is that crypto is dead in the water. I don't think it is. What I am saying is that all of us who think there is something real to this crypto future needs to take a very big step backward and figure out what it is we are missing in the story. Because of the 320 million people who have gotten their feet wet with this thing, 316.8 million of them aren't convinced. They are more interested in preserving their fiat than their crypto coins, and the selloff is a strong indicator of that.

Granted, the markets may be up in a few days, and even may be up big time. Certainly some folks are going to buy up coins at a discount once the dust settles. But the underlying circumstance is still a real one, and is something that the true believers need to really dig their teeth into.

That circumstance is that few people are convinced now. And that's pretty damn important if crypto desires to have any future at all. If you can't convince the 316.8 million people who have at least bought some crypto, how do you convince the rest of the 7.6 billion people who don't even own a single coin that crypto is the future and fiat is out?

Because again, people did not simply trade coins. They literally traded their crypto for fiat.

Yes, there are things happening in the world that are definitely influential in determining the sentiment, and what ultimately happens in the market. All markets are influenced in similar ways. You have this new strain of Covid, for example, which has gotten more than a few people worried.

But again, looking at the macro and not the micro, why would any of these things outside of crypto really matter in the eyes of the true believer? I mean, if you listen to the true believers they have this strong belief that crypto is somehow not even money. It's a savior. It's something that will forever change the world, and lift billions of people out of poverty.

Not sure I quite know how they expect this to happen. But let's entertain that idea for a second as we continue this evaluation of what happened today and what it signals is the real state of crypto.

If crypto is all these things, then why would anything else outside of it matter? It is supposed to be something that exists separated from the fiat world of government regulation, big corporate greed, and the influence of the tycoons who rule the day now, right? It is something that works of its own resources, independent of outside influence, operating only within itself and within its own ungoverned, decentralized existence. It is supposed to remove people from all of these influences and dive them into a world of freedom and bliss, right?

Again, I am not trying to disparage crypto. I am merely pointing out that no one is convinced, and that is a problem that needs to be worked out. Because what are the things being cited as influencing the crypto markets?

All of the things that shouldn't be influencing them, according to the true believers. Which simply means that the vast majority of people who do own crypto are not true believers of crypto, but are actually still true believers of fiat.

In other words, there is much work to be done, and we can clearly see that we are decades away from even the possibility of widespread adoption. So, what our focus should be is not on adoption itself, per se. It is way too early for that. But messaging. Because again, of the 320 million people who own any crypto at all, that 316.8 million people that haven't gotten the message aren't interested in what crypto can do to change the world. They are interested in what it can do to change the amount of fiat they have.

These are just my observations and my opinion. You can take them for what they are. I only share them because I think it is something worth at least thinking about. I think it is important because our excitement and impatience can actually hurt us overall in achieving the end goal. It can make us think unrealistically and irrationally, which is counterproductive and defeats the purpose.

In a sense I am saying, "Hold on there, buster. Let's get the farm started and crops planted before we talk about how great the soup is going to be."

Right now when it comes to crypto, we have the seeds in the ground. But nothing has truly sprouted yet, so we have to figure that out before we start planning what we will do with the end result of all of the hard work that must come first.

Today's selloff should be a stark reminder that we have lots to do yet.

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