Boom and Busts - The Daily Gwei #504
Technological progress is forever.
When crypto market cycles end we typically always see them compared to other big financial bubbles such as the “dotcom” bubble of the late 90’s. This time around has been especially acute because of just how fast the bubble deflated and how big it got in the first place ($3 trillion total). Though just like how the dotcom bubble didn’t kill the internet, the 2022 crash will not kill crypto.
I’m going to play devils advocate here and say this crash in crypto has been incredibly healthy for the long-term prospects of this industry. I mean, the amount of froth, unsustainable nonsense, scams, rug-pulls, ponzis and more that we saw in 2021 was just completely gross. Basically all of it was created to just extract as much money as possible out of the ecosystem while giving absolutely nothing back. Obviously this could only sustain for so long before new money stopped coming in, and that’s why we’ve been “down only” since the November 2021 top.
These crypto market crashes are like a wildfire ripping through a forest - burning down the old and dead things to make room for something new to grow. This is exactly what happens in crypto - we flush out all of the unsustainable/garbage projects and the froth that comes with them, and then we give birth to new ones that are nurtured in the bear market. And, just like a wildfire, this cleansing is anything but orderly and includes a lot of collateral damage - but the ecosystem is better off for it in the long run.
Another positive to crypto market bubbles is that they work to attract many new people to this ecosystem and they also work to keep crypto relevant in the mainstream media sphere. Yes, most of the coverage of crypto is negative from mainstream media, but at least they’re talking about us! Imagine if they were completely ignoring us - we’d probably have a much harder time getting attention. Obviously most new people that we “onboard” during the bull market won’t stick around - but some will - and some of those will go on to create the next great products and services.
Eventually these boom and busts that crypto is so used to will become less volatile and eventually the crypto asset class will become as boring as equities. Though just because it becomes less speculative doesn’t mean that amazing products and services won’t continue to be built - on the contrary, we’ll probably see even more of them since by that point crypto will be as ubiqitous as the internet!
In the end, speculative bubbles come and go - but technological progress is forever.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.