“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” – Howard Marks
As I watch the daily carnage across pretty much every crevice of the global markets & crypto economy, I think it’s important to zoom out and focus on the bigger picture. The post-COVID market mania has had lots of animal spirits that quickly evaporated into dust, but that doesn’t mean the long-term trajectory for disruptive innovation will prove incorrect. And yes, LUNA’s collapse is unequivocally a disaster and a blackeye for the crypto economy. And yes, Cathie Wood’s ARK funds have been a disaster since February of 2021, however if I’ve learned anything in the last decade of crypto & market cycles, it’s that what doesn’t break crypto makes it stronger. My guess is this will be another one of those pivotal learning moments (like the ETH DAO hack among so many others) for the industry that will help amplify greater diligence, caution, skepticism, security, and stronger technology moving forward.
Let’s dig into the broader web 3 & crypto ecosystem…
- Institutional adoption is happening at breakneck pace, which can be a catalyst when looking at mass adoption potential and network effects over the lifespan of a technology’s adoption, commonly known as the S-curve
- Venture Capital is on pace to exceed $100 billion in 2022, following what was a record-breaking year of investment in 2021; this is despite there being a really challenging market conditions and economic backdrop
- User adoption continues to accelerate and yet, we’re still just scratching the surface; less than 10% of the US population owns Bitcoin and we’re way under that number for the UK, France, Germany and many of the world’s most populated countries
- Projects like Helium, Hivemapper, Audius, and Pollen Mobile are growing exponentially and give us the ability to participate in the economic incentives and monetization of our data…“data rights are human rights” (not google, facebook, amazon, apple’s rights)
- It took BTC 6 years to get to 5 million users; crypto has over 300 million participants while the internet at the same time had 119 million; crypto adoption is growing at 137%/year while the internet grew at 76%/year; this is the fastest adoption of any technology in history; even if crypto only grows at the rate the internet grew at, we get to 5 billion users by 2030, a majority of the world’s population
Let’s shift gears to Ethereum…
- ETH2.0 is on the near-term horizon…who knows when it will actually launch, but if successful, it will undergo the equivalent of 12 years of BTC halving (“the triple halving”) with the snap of a finger; this will drop new ETH issuance under 1%/year, lower than BTC
- When the merge to Proof of Stake happens, Ethereum’s energy usage will decrease by 99.95% which should subsequently reduce the need for miners to continue selling ETH rewards to cover rapidly rising costs of energy to keep mining online (and it’s also in trend with clean energy/green energy becoming an acute focus globally)
- Post-merge, staking rewards are expected to increase from ~4-5% today to upwards of 9-12% which should be a major demand driver to buy, hold, and stake ETH with a long-term horizon
- Staked ETH is also going to be locked creating an inability to withdraw for a period; when you couple that with the launch of EIP-1559 last August (which burns ETH), we are creating an environment where it becomes deflationary as an asset
- Despite the very tumultuous collapse of LUNA, new protocols, layer 2 solutions that will speed up the network and reduce costs, defi exploding and other new innovations are coming online faster than we could ever imagine
Some Closing Thoughts:
It’s easy to get sucked into all the negativity and pessimistic narratives around crypto right now, especially with question marks around the future of stablecoins + BTC & ETH both down over 50% from their all-time highs. We’re going through our next round of “crypto is dead” proclamations and celebrations. During the course of Bitcoin’s 13 year history, it has been deemed ‘dead’ or ‘extremely close to death’ by many journalists, economists, analysts, and financial experts–449 times since tracking starting in 2010 to be exact, and we’re on record-breaking pace for declarations in 2022.
And while skepticism, criticism, and feedback is critical in the evolution of any nascent technology or innovation, the ‘Lindy Effect‘ suggests that what doesn’t kill crypto will only make it stronger and hence the longer it persists, the more likely it is to continue to persist. I am not in the camp of bitcoin, blockchain, crypto being a one size fits all solution or that it should replace everything or that there is no place for centralized solutions. I think finding an equilibrium of balance between decentralized and centralized operators will be critical for long-term proliferation of the w3b & crypto ecosystem.
I urge you to zoom out and focus on the big picture during these periods of volatility. Focus on the technology, the innovation, and how the communities are moving forward vs. focusing on the price. Every bear market has come and gone and after each one, I have kicked myself and watched everyone around me do the same thing for not focusing on accumulation during the periods of depression. Timeless wisdom from Mr. Buffett…”When investors are fearful, be greedy. When investors are greedy, be fearful.” There will be another bull market cycle and the next one will be even more fun and exciting and filled with plenty of surprises, so enjoy the ride.
DISCLAIMER: This is not investment advice nor is it an endorsement or solicitation of any kind. I do NOT recommend you invest in Ethereum (ETH). This is for entertainment and informational purposes ONLY. Investing in cryptoassets is extremely risky, volatile, and may result in significant or permanent loss of capital. Those risks should be evaluated independently or with a professional before taking any action. You can assume I invest in everything I write about and am not recommending you do the same. Please do not use this information as a foundation for making investments in Web 3 projects. Do your own research (DYOR)!!
SOURCES:
https://cointelegraph.com/news/2022-q1-venture-capital-activity-in-crypto-set-to-outpace-2021
https://www.binance.com/en/news/top/7072438
https://chaindebrief.com/cryptocurrency-adoption-curve-is-the-fastest-in-human-history/
https://blog.ethereum.org/2021/05/18/country-power-no-more/
https://www.coindesk.com/learn/2016/06/25/understanding-the-dao-attack/
https://99bitcoins.com/category/bitcoin-obituaries/2022/
https://squish.substack.com/p/the-triple-halving-where-we-stand?s=r
https://hbr.org/2021/08/stablecoins-and-the-future-of-money
https://moneymorning.com/2020/08/27/the-lindy-effect-shows-why-bitcoin-has-a-shot-at-1-million/
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