Crypto Headed for a Major Burn

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1 year ago

It is estimated that there are roughly around 19,000 cryptocurrencies in existence. Compare that to fiat currencies where there might be around 180. What this means is that there are simply too many.

In fact, this period of time in cryptocurrency has constantly reminded me of the dot com era where we had thousands of illegitimate businesses and scams. Can any cryptocurrency survive?

I think it is a "probably yes."

The thing about the dot com era is that within the thousands of illegitimate and scam businesses out there, there were actually a few businesses that were real and that provided something of value, and that could see their valuations justified.

Those companies survive today while all the others died in the dot com crash. What we saw, essentially, was a cleaning of the house.

It is clear that crypto is in a bit of trouble. It's tough to even call it a bear market for a guy like me. I tend to think it might be a realization coming to its head that this thing has simply gotten way out of control and that people are beginning to realize this, especially after the whole Luna debacle.

So, what coins will survive? That's probably a hot discussion for a debate and depending on who you talk to many will have differing opinions. It is also a tough discussion to have since many people are emotionally attached to certain coins and tokens—a recipe for financial disaster by the way.

It would seem logical to conclude that at least Bitcoin and Ethereum will likely ride out the storm coming. Perhaps a Bitcoin Cash and a Doge can survive as well. On the latter two, with particular attention to Bitcoin Cash, I think it has the goods to actually be something people can use if it ever sees more widespread adoption. I think it even has more practical use than Bitcoin itself, but that's for another day.

Either way, I think that this big burn is coming, and I think "investors" in the crypto world need to be more aware than ever before what they are investing in and why. I think it would also be wise to be extremely cautious. In other words, this is not the time to go all-in and drop your entire life savings into anything here, including into the obvious ones who are most likely to still exist after the cleaning of the house is over and done with.

Image courtesy of Pixabay, user mohamed_hassan. Bitcoin Number Metallic - Free photo on Pixabay

I have said many times to the "buy the dip" crowd to be quite careful in using this mentality as you might use it for other asset classes. And the reason I have said this is because I don't believe you can treat crypto the same way you would, say, the stock market.

Why?

Because as I have stated many times before, the stock market is proven and has hundreds of years of history to go by to determine wisely that the only ultimate direction is up. So, buying good companies in down periods in the stock market just makes sense.

Crypto is unproven and is only around 12-years old. You cannot have as much confidence that the only direction is higher when it comes to crypto because there is not enough back end data to support that reasoning.

Cryptocurrency is a long way from proving itself as viable, let alone as a currency. A lot of it may indeed have a use case, but the fact remains hardly anyone is actually using it. So it is something that is largely still being tested.

If you wanted to give it a name right now, "beta" might be a good one to assign to it. It's in a test phase and we have no idea what things will look like once we get out of it. You cannot simply assume that the "beta" phase is indicative of what crypto actually is or becomes.

One has to consider that part of the problem crypto is long facing is the fact that no one really knows what it is—no one knows what to expect of it. It is part of the reason major companies, especially retailers, have been avoiding adopting it as a means of payment. No one has confidence enough in it to make the leap and bring crypto into their ledgers.

Image courtesy of Pixabay, user stevepb. Shopping Spending Till Slip - Free photo on Pixabay

Again, crypto has not yet proven itself.

If we see a major burn in cryptocurrency it could actually be just what the doctor ordered because as a result of it, many "dead" currencies would be rooted out and tossed into the fire, gone forever, making room for the real ones to then spread their wings and fly.

Once its real and people can truly determine value and usability, maybe then it has a chance to become more than what it has become so far.

But of course, only time will tell. The only thing I think people need to be concerned with right now is avoiding being burned in the burn. Proceed with caution because I think the hay day of fast bucks are over now—in other words, I doubt we see massive wealth created the likes of which we saw with the Doge boom or even Bitcoin itself with "exciting" new projects.

Especially considering many "retail investors" are even pulling away from crypto right now. So much so that many crypto firms are scaling back operations and expansions and are slowing new hires, and even considering scaling back their current staffing.

I think what people should be thinking about now is that probably at best, 5% are the survivors. And I even think that's too high of a number. Of the 19,000 cryptos out there maybe 100 still remain. It is most likely even that number is too high. A safer assumption would be that we wind up with 5 or 10 cryptos and all the rest simply go away.

Lead image courtesy of Pixabay, user TheDigitalArtist. Bitcoin Blockchain Crypto - Free photo on Pixabay

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1 year ago

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You have to compare cryptocurrencies not with currencies but with shares. How many are there?

$ 0.03
1 year ago

The problem, or dilemma if you want to call it that, for me when it comes to cryptocurrency, is that it remains a force. I know, from reading some of your stuff, and from your commentary in the past on noise.cash and now noise.app, you tend to be on the fence along with me as to what this whole thing is really about and what kind of future it has.

The long and short is that it is a tough nut to crack, and it is hard to see it as a "missed opportunity" in a time like now when it's all in the dumps and simply go "all-in," and bet the farm.

It remains and area of discussion, and there are still a lot of people out there who wholeheartedly believe in it. At the same time, I simply can't value it. I simply can't. I am so used to hard assets like stocks and gold and bonds and whatever else is out there. I can't do the same due diligence (pardon not saying "research," I am a stock market guy) with crypto as I can with anything else.

So, I stick with it enough that MAYBE if something happens with it, it all works out in the end. KNOWING at the same time I may be missing some point that is important. KNOWING that I may be misunderstanding something as well. And KNOWING that maybe I am trying to compare apples to apples when I need to look over at oranges to get my answer.

Even when it comes to stocks, there is not really a limit to the number of shares outstanding. Any company, at any time it chooses, can issue more stock or dilute the shares through buybacks. So, even looking at mere numbers of how many coins are out there doesn't help me much. And not knowing if the limited supply will be enough in the end, with no recourse to fix that, gives me a reason to question a thing or two.

$ 0.00
1 year ago

Cryptocurrencies are not shares, but they are speculated with in the same way as shares. It doesn't really matter that there are thousands of them. The vast majority do not play a role at all and never will. They have such a low market capitalisation that you don't have to worry about them at all.

But cryptos are not currencies either. Some may become so in the future. Time will tell.

$ 0.03
1 year ago

I believe XRP and XLM are going to survive with the others you mentioned. Another few weeks and I'll be in a position to buy the epic dip. Sorry I've been quiet lately, trying to fix things at home has taken me away from here quite a lot 😬

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1 year ago