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Crypto VC Thoughts: Crypto Business Cycle 2

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cryptocurrency

I wrote the first part of the crypto business cycle without offering a solution. So here is the second part of the solution. 

Image credit: https://cryptocurrencyfacts.com/market-cycles-in-cryptocurrency/

The market cycle follows the psychology of the market cycle. The crypto market seems to follow the stock market cycle, but I’m afraid I have to disagree.

It follows a doughnut business model ?.  

The real growth of the crypto ecosystem is not scaling as many projects try to achieve. 

Instead, we should focus on sustainable growth.

Image credit: https://doughnuteconomics.org/about-doughnut-economics

The cycle of cryptocurrencies has eliminated many coins created in the past decades. Many of the creations failed simply because they only focused on one aspect of the currency – scalability. 

Since cryptocurrency is the concept of money, the newer version of cryptocurrency is better and easier to use. Similar to technology advancement, the latest technology invention is always better. 

From a toaster that baked bread to a wifi toaster connected online to bake bread through voice control and automatically-collected data to adjust the baking method through machine learning and to achieve custom baking, it all looks pretty advanced technology to serve a better more than a toaster can do. 

The problem with the cycle of technology advancement is unsustainable growth that only focuses on growth itself. 

They do not focus on the benefits that to generate through those cryptocurrencies.

What are the benefits of using Ethereum instead of using Bitcoin? Besides the blockchain constraint to only allow me to spend on Ethereum to purchase NFTs, I cannot use other cryptocurrencies to purchase the same NFT.

Many cryptocurrencies are constrained within their blockchain and cannot perform cross-chain payments, limiting their usage. Many have been abandoned due to their underutilized, and the market crashed to push users further away.

The potential of cryptocurrency is to embrace the global financial market without being influenced by the traditional market. 

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Crypto Research

Crypto is a good investment or not

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Many people buy crypto to believe it is a great investment. However, it may not be the case.

I asked ChatGPT about the crypto investment and here it is:

Investing in cryptocurrency can be a good opportunity, but it also comes with high risk and volatility. It is important to thoroughly research and understand the cryptocurrency market before investing. Additionally, it is recommended to diversify your investment portfolio and not to invest more than you can afford to lose.

Here are some misconceptions:

First, crypto is not a traditional investment that requires a conventional way to invest. Instead, it is a catch-or-miss investment that you really need to time the market to make profits.

Second, you do not need to hold for too long if you need money quickly. Crypto tends to perform badly long term than average assets did.

Third, high risk only sometimes has high rewards. Many crypto with high risks may not ever provide high returns eventually and many go to zero instead.

Last, do not go FOMO because you are likely to become a bagholder.

There is not missing out and it is too late in the crypto. Rather, you should always keep an eye on the market.

Photo by Jon Tyson on Unsplash

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Crypto Research

Mother of all bubble

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We are heading into a bubble economy and there is one that is about to pop.

ChatGPT suggests that a financial bubble is:

A financial bubble is a situation in which the price of an asset, such as a stock or a commodity, becomes artificially inflated due to excessive speculation and investment. This can lead to a situation where the market becomes overvalued and eventually collapses, resulting in significant losses for investors. Bubbles can occur in a variety of different markets and can be caused by a number of factors, including low interest rates, economic growth, and investor sentiment.

Let’s take Tesla as an example.

Tesla CEO is Elon Musk, who purchased Twitter last year and believed the company can help Tesla to make more profits.

Does it? Or he tried to inflate Tesla instead?

If you go to Twitter, there is less opposition than a supporting voice.

Elon Musk sells Tesla cars and Tesla stocks.

People purchase cars to help pump the stock price and when stock price goes up, people want a new Tesla.

Despite all the bad reviews about the car and its questionable autopilot feature, Tesla cars sold quickly and stock goes up no question.

Is this a Ponzi scheme?

Similarly, cryptocurrency is also highly speculative.

It goes up a time to time, but people buy the narrative without further investigating how useful the crypto really is.

What if people stop buying the crypto, will that still go up?

What if the economy is so bad and the interest rate is high that people have less money to buy more crypto?

We will see how it goes.

Photo by Pawel Czerwinski on Unsplash

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Crypto Research

One more thing NFT can do

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California will have a pilot program to use NFT to record car titles as an innovation of record management. 

ChatGPT stated NFT is:

NFT stands for “non-fungible token.” It is a digital asset that represents ownership of a unique item or piece of content, such as a digital art piece or collectible. NFTs are created and stored on a blockchain, which is a decentralized digital ledger. This allows for the creation and transfer of ownership of digital assets in a secure and verifiable way.

Finally, the government has realized the use of the blockchain, and it will reduce government spending while providing more accurate information to citizens.

I think blockchain has more utilities other than money. Digital money is the first step in testing society’s compatibility, but the blockchain should focus more on providing services rather than investing to people.

That blockchain service can be essential for society later rather than simply going to moon-style investments to create unsustainable pump and dump.

Such government collaboration is the first step to making blockchain a social system.

Photo by Coinhako on Unsplash

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