7 Things You Need To Know Before Entering Crypto Market (2)
Moritz Neto is the Head of Growth at bitfwd, he is a blockchain entrepreneur, crypto growth specialist with an obsession for UX Design optimization for blockchain products, community leader in the crypto landscape, mentor at Blockchain Centre Vilnius.
A framework to make the most from what is yet to come in the Blockchain world.
[Part 2] [Part 1]
As the usual disclaimer goes, all the information in this article consist of my own opinions, insights and observations. They are not, by any means, financial advice. Use all the information as new inputs, be big boys and girls, do your own due diligence and take responsibility for your own decisions.
Alright ladies and gentlemen! Let’s get straight into business. This post will have Thing #3, #4, #5, #6 and #7.
This is a big one.
Why is it important to look at?
By understanding the underlying mechanics and motivations of the subversive crypto-culture it is possible to:
A. Identify a winner criteria to evaluate projects.
B. Understand the growth explosion that we are facing.
Without going extremely deep in the whys, but instead focusing on the what’s…
Crypto-currencies represent intrinsically a paradigm shift in what money means in our financial system. It challenges by its own nature and story of what economical value means in our time and society. (Be happy, you are living the revolution).
An asset that is not issued or controlled by any government organization, it’s fully digital and allows virtually full anonymity; sounds like a paradise for anyone who disagrees or question the financial structure that we live in.
Why does it matter?
It matters because it creates an extremely fertile soil to align people around an ideal. And that is the spark for every cult that has existed.
And that is exactly what is happening.
— Ok Neto, I got you, you are saying that crypto has aligned people around something. Cool. But what is the killer criteria that you look for in projects?
The killer criteria is a subversive ideal and community. The exact ingredients that nurtured the inception of Bitcoin.
In my opinion, enterprise products using blockchain have the same chance of making it as many web3 solutions. But those who will make it big time (aka 1000x, aka moon) and change the world, won’t come from the enterprise, but from people that want to fully rethink the way we look at our structures.
On top of all the noise around Bitcoin you have certainly heard:
It’s a bubble.
There are many ways to look at it, since all you’ve heard, I’m pretty sure is that it is a bubble.
I will give the counter-argument.
Using the words of Garry Tan, investor in Coinbase, which I had the pleasure to meet at ASES Stanford in 2017.
For the top 40%, wealth accumulation is driving an ever- aggressive search for yield in a low-growth world — the helium inflating the “everything bubble”. Bitcoin isn’t the bubble, it’s probably the pin.
What does it mean in practical terms?
It means that the crypto volatility and speculative features allowed a enormous layer of the society that does not have access or resources to invest as high net-worth individuals, to generate returns virtually bigger that early investors in Uber. And it was this speculative power that drove the insane growth of the market last year.
Is this sustainable forever?
Certainly not. The markets will get more mature and well developed, but I have to admit that I love seeing people that would have never had the opportunity to get a round in a classic startup, making insane returns on crypto.
What you have to know about project’s partnership in simple terms, is that they have to be real.
No, I’m not trying to insult your intelligence. In fact, there is a really thin line that defines what is a meaningful partnership, and what is just bullshit.
So, being fairly generalistic, there are three kinds of partnerships. Fake, Real and One-way.
The fake ones are the most common. By fake, I don’t mean that the partnership is not mutually agreed and somehow will not benefit the speculative value of the coin. What I mean is that there is no true value being built from that.
In simple terms, it is the classic “Let’s be friends”. Where one project artificially supports the other.
Why is this not cool? Because many projects do this solely for speculative reasons, to generate hype across the community and to drive prices up. But there is no intention in creating real technological or community value to the ecosystem.
The Real ones are game changing. When a project starts to implement other project’s technology, protocols and tools, it really means that there is something behind just words, and there is actually tangible value being created.
And lastly, we have the one-way partnerships. It’s basically what IOTA did with Microsoft and other big-boys. Announcing magnificent collaborations to the community, pumping the coin to the moon, (certainly dumping a lot of it), and then everything ended-up being a misunderstanding that at first 4x the price of the coin and then crashed it. Not cool for many people.
OK man! So how can you identify which one is which?
Long story short. It’s damn hard. The only efficient way to verify if a partnership between two projects is real and meaningful, is to get in both projects Telegram groups, ask both parties what are they doing together and measure if there is consistency in the answers.
I know it sucks, but if a spoken partnership is the foundation to a pump that is happening, you should really look to verify veracity before making your bets if you don’t want to lose big time.
#5 Market Sentiment
In its volatile nature, the crypto market is driven by its sentiment. So a couple of days can become a roller coaster of emotions.
What you have to know here is that the market is an animal that feeds from two sentiments only.
Fear and Greed.
I’m not qualified to give financial advice, but I will tell you what is out there, and tell you what I do.
FUD -> Fear. Uncertainty. Doubt.
Fear. China news. Canceled partnerships. Hacks.
What does it cause on the market?
40% drops in price. Sometimes more, sometimes less.
What does it cause on people?
People selling their coins at huge losses without clear reasoning, driven by a belief that the bubble has burst, they will lose all their money, and if they don’t leave the market NOW, everything is over. AKA. PANIC SELLING.
How does it affect you?
Pain in the heart, nausea, and loss of sexual desire.
How long does it last?
From days to weeks.
What do I do on FUD moments?
1. Nothing. I wait and ignore it. No trades, no positions closed.
2. I dedicate some bets on coins that I believe will recover faster than others to then readjust the portfolio.
FOMO -> Fear Of Missing Out.
Greed. China news. Announced partnerships. Project milestones. ICOs.
What does it cause on the market?
Absurd Growth in the price (50% +, up to 20x)
What does it cause on people?
People buying in after a coin just 10x without clearly understanding why it is has happened, expecting that it may keep growing. It also causes fear that they will miss the next Bitcoin or Ethereum and that they will regret it forever.
What does it cause on you?
Euphoria. Sweat. Head-ache. Pain in the guts.
How long does it last?
From days to weeks.
What do I do on FOMO?
1. I make peace with myself by accepting that I may have lost a good opportunity but there will be infinite more opportunities to come (and they will).
2. I won’t buy in on vertical candles, I always wait for it to stabilize and then make an analysis of what has caused it, and if there is more potential in the short term.
#6 Proof of Fire.
Have you heard about Proof of Stake or Proof of Work?
So… Proof of Fire has nothing to do with that :D
Basically during the whole year of 2017, I would say that at least 90% of all the money raised… Were raised on top of promises.
Is this alright?
It is if the projects keep their promises and deliver on their roadmaps.
Will it happen?
No. It won’t.
That’s where the proof of fire comes from (pretty dramatic, I know). But being able to deliver on the roadmap will make or break big projects.
If many of the massive ICO’s from 2017 don’t manage to deliver according to their maps, they will become massive red flags as scammers, incompetent and unaware. And then investors will feel really really really sad for investing without paying enough attention to the team background.
On the other-hand, projects that manage to deliver on their promises and build solid solutions creating value to the community will become massive winners.
And right now we need more of these winners.
So, what do you have to pay attention to here?
Simply, if the projects are delivering on what they promise or not. If yes, positive points, if not… It’s a no no for me.
#7 What About BTC?
So here we are. What about BITCOIN ?
Well, I’m not going into rodeos and over complex conspiracy theories. I’m going to tell what I think about BTC, what is my take on the current situation, and where I think we are going this year.
My opinion is that BTC was exactly what it had to be. A subversive, p2p, sub-culture thing. It had solid technology, community support and a lot of excitement around it. It was a proof of concept that went right, a better way to think about digital money and p2p relationships in the digital realm. A successfully implemented minimum viable product!
Now it has became the Kardashians of the Crypto-world. BTC is famous for being famous. The technology at this point is not scalable, the community is fragmented by greed and if there is a head that has to roll, it’s BTC’s one.
But still, famous for being famous is not exactly a bad thing. It’s just a fact. BTC has the first mover advantage, it has the fame and the lights, but I don’t believe it has what it takes to become digital money.
BUT, what I think it has all the capabilities to be, is a store of value and the base for many other digital currencies. If one day the dollar was backed by gold, but people were trading dollars and not gold in itself, I believe that in the long term BTC has the potential to become the standard of value to the crypto world, AKA DIGITAL GOLD. And this is extremely powerful on its own.
So you think that BTC will keep growing?
Yes, I do. I just think that in the long term it will change its nature, and many other tokens will assume the position of currencies backed by BTC.