Crypto Headed for a Major Burn

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.

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.

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.

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