Beyond Speculation - The Daily Gwei #265

Focusing on the fundamentals never goes out of style.

ETH has been cooling down over the last month or so after an incredible run to a new all time high of $4,400. Though what hasn’t been cooling down is all of the building going on in the Ethereum ecosystem and, as I mentioned in my tweet below, the more time you spend in this ecosystem, the less you care about the day to day market movements.

At this point, you’re all well aware of the fact that I’m a fundamentals-focused guy and that I like to focus my energy towards the real value being built in this ecosystem. The best thing about having this focus is that it’s really easy to stay engaged regardless of what the market is doing. Think about it - if the ETH price literally sat at $2,500 for months on end, would you be bored in this ecosystem? It’s not like projects stop shipping new products/features or interesting research stops being published - really the only thing that happens is that the speculators leave and the overall noise goes down. This, in turn, creates a more calm and collected community of builders who keep pushing the fundamentals of this space forward.

Looking back in history, we can see that all of our favorite projects were built, deployed and grown during bear markets. Aave (originally called ETHLend) did their ICO in 2017, built their product and community in 2018/2019, and launched v1 of their money market protocol in January 2020. Maker was founded in 2015, built during 2016 and 2017, and the first version was deployed to mainnet in December of 2017. Uniswap was funded with just a $100,000 grant given to Hayden Adams by the Ethereum Foundation and then launched in November of 2018 which was just 1 month before the bottom of the bear market!

On the flip side, and this isn’t something that’s spoken about publicly very much, the dark side of bull markets is that they give project teams a false sense of security. This is because as the bull market rages on, there’s plenty of money sloshing around and all sorts of tokens will be going up greatly in value for no particular reason. In DeFi, if a project has a liquidity mining program, then as the token price goes up, the yields become more lucrative and a projects total value locked (TVL) will increase leading some teams to believe that they’ve found product/market fit. In reality, when the inevitable down market comes, those yields drop off a cliff and the TVL leaves as quickly as it came. On top of this, most of the “community members” end up leaving because in the end they were really only there because they were making money.

All of this isn’t to say that I believe we’re going into another multi-year bear market and you should hunker down and prepare for the worst - my point really is that if you’re in the Ethereum ecosystem you have nothing to worry about. If you’re a builder then you keep building, if you’re a user then you keep using and if you’re a speculator, well, you can keep speculating but maybe have an outlook of longer than a couple of months!

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.