After reading a comment thread on Twitter I gave the current state of the markets some thought and realized that most people don't actually know that the majority of their crypto holdings are highly overvalued.

Let me break it down.

How Much Is a Coin/Token Worth?

You would think that projects with great long-term vision will always attract the most investors because uncertainty isn't really good if you are planning on buying and holding for a long time. For example, I have been reading a lot of stuff Taskmaster is publishing on Hive recently and even though I'm still no expert on the subject, the underlying idea behind Hive seems to have long-term planning embedded into it.

On the other hand, if you take any "meme coin" from the top 20 or 30 by market cap you will find none of that. The purpose of such crypto is to be "used on mass" with expectations that increased use will inflate the price but will that actually be the case?

The Importance of Usecases

If you put Hive and Shiba Inu side by side and compare their intrinsic value, you will soon realize that one is simply a currency while another represents ownership of a network that is not a work in progress, it exists and operates today.

This network has rules and those rules imply that all dapp owners need to have the appropriate amount of Hive power to even be able to provide services to their users. Shiba Inu became irrelevant in this comparison all of a sudden.

Do you think informed investors will put their money in networks and people or in a very badly executed idea that no one needs or wants?

The Bubble Is Larger Than You Think

Going past use cases we also need to look at the current state of the market. NFT as a technology is great but the fact that Gary Vee and Snoop Dog are the ones promoting this technology should at least make you question a few things. Here is a little thought experiment.

I mint an NFT on Ethereum, sell it to you for 1 ETH and as an end result I have 1 ETH and you have a piece of digital art that is theoretically worth 1 ETH. We put in 1 Ethereum in this equation but ended up with 2.

The relative value of the NFT market and the real value of it are two very different numbers. The same goes for ICOs in 2018 and any other IDO project that sells newly minted tokens for an existing form of currency such as ETH. If you want to go into detail on this subject Taskmaster has another great article I would recommend reading.

Is The Bear Already Here?

It is hard to say but if 2018 was an indicator, I would say that we still have a long way to go before things turn ugly. A lot of the new retail investors got locked into DeFi on ETH due to high fees. Their $500 deposits require $300 in transaction fees to be turned into actual dollars.

OHM forks and OHM have taken a lot of people down in this recent correction. Altcoins are completely decimated when you compare their prices to BTC prices just two years back. BCH was at $4k when BTC hit 20k. It is now worth $450 while BTC has doubled in value. Not enough people actually made serious money in the first run and I'm guessing they will be back for more in 2022. After that, we should expect maximum carnage.

What Would a Bear Market Look Like?

This brings us back to the Twitter thread I linked. I like reading what Cobie has to say because he is an actual OG that never sold out (as far as I know) and his thoughts actually resonate with my views of the situation.

95% of these trendy alt L1s will fail to maintain ecosystems & anything that will struggle with funding will disappear — eg Sushi maybe. And all the coins going full ponzinomics for growth purposes will die, like a bunch of the Avax ecosystem. Most NFT roadmaps will be abandoned.

Metaverse and gamefi coins will all go to zero as they realise the amount of capital needed to build something sustainable is a lot more than they have. A couple with warchests may keep building. Meme tokens go to zero too and most of them don’t even get bounces.

Warchest treasury projects are not guaranteed success. They’ll become complacent with their primary focus becoming trying to preserve the treasury or figure out how the team can personally claim some of it. Young, hungry teams with eyes on the prize will be much more effective.

If you weren't here for the last bear you don't know how much pain and agony a bear market can bring. Anything that made sense to you during the uptrend will suddenly seem so stupid that you won't even know why you put your money in such dog shit.

In my humble opinion, any coin or token that doesn't have a clear long-term plan will crash and burn. We keep forgetting that most funding comes from treasuries and those don't mean much when every single crypto goes down by 90+%.

The Metaverse is a hot subject but a bit premature IMO. All metaverse coins will go down in flames until they have a working product that makes sense for both the investor and user. It's great that you think your land in a badly-designed crypto game may be worth a lot someday but what value does it provide to the person that is supposed to buy it from you? Can they realistically extract as much money from it as you are selling it for?

Again, a dapp owner on Hive will need Hive constantly to keep the dapp running while a BSC project will need absolutely zero BNB to stay afloat. Usecases in this scenario are very different because one side is burdening users with operational costs and the other isn't.

I can't even imagine how the corporate mentality that came out of Facebook has envisioned their version of the metaverse...

Meme coins have had their fair share of fame but I can see them going for one more run before disappearing completely. People seem to like owning a million of something rather than holding 0.01 BTC. Unit bias is real and it will burn a lot of bags until this run is over.

Forks and copypasta that add no value to the underlying code will have to die. Their economy is mostly based on farming and once the prices start dipping farmers won't care about the long-term vision. They came for profit and they will extract it until the very last day.

Sushiswap is great but is it really that much better than Uniswap to take that market sare and become a better product? I just don't see that happening.

EVM compatible chains are great in an environment where ETH can't keep up with the user numbers and fees are going through the roof but what happens if those fees somehow get dealt with? Do you still need to use BSC, Avalanche and Solana? The lack of viable usecases and bad ponzinomics will crash almost all L1 clones if they don't start offering a unique product that users can't find on Ethereum and we all know that innovation isn't their stronger side.

DAO funds will simply have to become toxic. There will be too many butthurt people that only want their money back and if the market tanks hard they will probably call for regulation as well. The recent BadgerDAO hack showed that the community doesn't really have to exist as far as the project is concerned. The core devs still have God mode enabled even though they aren't the owners of the protocol for a long time now. The hack happened, devs stopped all transactions by clicking one button and no one sees a problem with that... Yet...

How To Prepare For a Bear Market?

If you are in crypto for all the right reasons a bear market won't mean much to you. It is just another great buying opportunity and with all the noise out of the way you will have a lot more time and room to create great things in this industry.

There is nothing wrong with gambling on shitcoins every now and then. Why waste an opportunity if you feel like you can profit from it? On the other hand, going all-in on one of them with the hopes that someone will pay more in the future... now that is a serious issue that you need to deal with asap.

As I said in my last article long-term commitment can't be faded. If you are stacking BTC, ETH, or Hive and your end goal is to own as much as you can then a bear market is an opportunity, not a disaster. Even better if you are stacking because you recognized the long-term potential early and don't care about the current speculative value the market has determined as fair.

And if you do get caught with your pants down while holding heavy bags of useless coins, that is on you. There isn't really a preparation process that will prevent you from losing money if you really want to.

Posted Using LeoFinance ^Beta