I’ve lost track of the amount of crypto-assets that I’ve either sold way too soon or didn’t have the guts to buy into really early on. Among those assets are some fan favorites such as AAVE and SNX in 2019 because back then the consensus was that all value would accrue to ETH and that tokens were essentially worthless. Well, that obviously turned out to be very wrong.
There’s been countless examples in crypto of something starting off as being worthless/worth very little and then going on to become something extremely valuable. The first and most obvious example of this is Bitcoin itself because during the very early days people were literally giving BTC away for free via things like online faucets. I believe that this same principle applies to so many things in the crypto ecosystem from CryptoPunks to underappreciated DeFi tokens to meme coins. Their value only starts to show itself after a period of time has elapsed, a community has formed around the thing and/or it becomes useful for something.
What’s even more interesting is when people start to value something that may seem crazy and I think NFTs fit this theme perfectly here. I mean, even CryptoPunks (one of the most well known NFT projects) still comes under heavy scrutiny from many people not understanding why someone would pay tens of thousands of dollars for “a pixelated portrait”. Well, I’d love to see these people’s reactions when I tell them that a pair of socks is trading for almost $40,000 at time of writing. Of course, I believe that these people are missing the forest for the trees when it comes to CryptoPunks/NFTs in general and if you’re curious why, I outlined the reasons in a piece that I published back in January here.
Other than NFTs and early fundamentals-based investments like DeFi tokens, there are plenty of “meme coins” that have risen greatly in value over the last few months. Now, I would argue that the value these coins have accrued is almost entirely speculative but that doesn’t take away from the fact that they are indeed valuable (love it or hate it - Dogecoin still has a $27 billion market cap). But, on top of speculative value, these coins also accrue value almost entirely from marketing and memes whereas while NFTs and DeFi tokens also accrue value from these things, they can also accrue value for many other reasons such as real fundamentals.
At the end of the day, “value” is entirely subjective and ultimately in the eyes of the “bag-holder”. There are plenty of people out there who don’t even think BTC or ETH are valuable and consider them both to be scams and then there are plenty of people who consider fiat to be a scam. So because of this subjectivity, we typically leave it up to the “free market” to act as the arbiter of what’s valuable and what’s not but as I’m sure you’re all well aware, the market is not often a very efficient arbiter.
Have a great weekend everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.