Understanding the Crypto collapse
It was a collapse. What do the statistics tell us?
Let’s be clear, the recent drop in crypto price is a collapse, not a ‘correction’. It is 46% off its all-time high in two weeks!Over $1.1 trillion of wealth eliminated. That $0.1trillion lost is $100billion. $100,000,000,000. Thats alot of zeros of money lost.
People’s portfolios have been hammered. Confidence will have been slammed.
There must been millions of amateur traders, who have gone ‘all-in’, that must have been suffering badly with their leveraged trading positions. There must be many lending companies who must be wondering if those who have borrowed from them can pay them back.
Crazy 1 year boom.
You have to separate Bitcoin from the ‘Alts’, the ‘alternative coins to Bitcoin. 10,005 other coins today.
In the past year the price of a Bitcoin has grown from US$8,900 to an ATH [All Time High] of $63,900. That’s 618% growth!
The Alts have grown from $85bn in value to $1,445bn. A staggering 1600% growth.
Crazy two week Bust.
The total crypto market is down 46% with Bitcoin and Alts down approximately the same. $1.1trillion worth of value eliminated in 2 weeks.
The global crypto market has always had the potential to correct fast. It’s controlled by unregulated trading markets. The crazy growth from Dec-March meant that then any rubbish was hyped as traders look for the next 10X growth coin. And the BS came in spades. Doge, Elon Musk, XRP, Internet computer lists at $45bn. The market was ready for a collapse. Deserved one.
Bitcoin goes first.
Bitcoin dropped from ATH a month before Alts. Bitcoin’s ATH was 14th April. The Alts ATH was 13th May. Bitcoin always leads.
On 13th May, Bitcoin failed its growth push, the market sentiment turned and the next week was carnage. 30% drop.
Bitcoin will bounce up first.
Bitcoin leads the market again. So expect Bitcoin to lead on the way up after it reaches it floor which most people are guessing are about $33,000. I will buy anywhere between $33–35k.
Alt coins will follow.
The most logical situations are then either rally back to previous ATHs and onward OR some sidewards movement for a few months. 30% up and down. Traders will love it. Investors will not unless they are smart.
Other development should be an Alt Shakeup
The number of crypto coins listed on exchanges just hit 10,000.
9,000 are rubbish, should not be listed and will be illiquid within 12 months or less.
600 of the 1,000 remaining coins will have to prove they have a business justifying their market capitalisation. They don’t so these coins will struggle. What is the demand behind your coin to justify market capitalisation?
95% of the value of Crypto is held in the top 400 coins. 4% of 10,000 listings.
This makes a mockery of the 80/20 rule where 4% [20% of 20%] of coins should deliver 56% [80% of 80%] of value.
Yet these are crazy days where just 5 tech companies [FAAMG] are 25% of the Nasdaq value with its 3,300 stocks!
Its logical that Crypto will concentrate more. Bitcoin grows to $150,000 per coins and $3trillion value. 5,000 more listings will arrive in 2021 yet the top 400 get more powerful, in fact the Top 100 then control 95% of all value. A top 50 coin will have a $5trillion value rather than $2billion value. The #100 coin will have $2billion value [it peaked at $1.1bn three weeks ago].
Bitcoin will bounce off around the $31–35k level. 50% drop from ATH. It may take three months to reach previous ATH.
The Alts will bounce a bit later after more of a correction. 55–60% The smaller alts will get hammered. Many will not recover. Then they will rally. Top 50 coins first. Yet they will lag Bitcoin.
Some time soon the Analysts are going to take control of the crypto-market. Professional Financial Analysts who advise major investment institutions will analyse the crypto-assets and they are going to seriously challenge the potential use cases behind many coins. Asking questions like ‘How much value is a governance coin expected to require?’ Answer — not much, certainly not $1bn.