On: Crypto
This piece was written over a period of 3 weeks, and some examples may be dated… which gives even more credibility to the main talking points.
$5 Trillion – I believe that’s our breaking point. At least for now. With all the hype as of recent – Tron (TRX) being valued more than Twitter, previously Cardano (ADA) being mooned billions with no actual working product – an impending (huge) correction has been on my radar.
How big, you might ask?
60%. Easily.
And that’s market-wide.
I’ve actually had conversations with a good friend of mine – a quant by day, crypto trader by night – and he’s had valuable input on one of the major reasons why we’ve seen crypto enter the “stupid bubble phase” – but please understand that I am not stating that cryptocurrency is in a systemtic bubble, but rather experiences localized bubbles as the investor/user demographics begin to evolve. This is a new realm of economics – cryptoeconomics – and it’s a field that will grow in demand over the next few decades.
My friend’s thoughts on the inflated market was primarily surrounding Tether. The issuance of Tether without any public audit of the actual funds backing up the supply, is an issue concerning the entire crypto community. Now that you have a liquidation method whereby whales and other large bagholders can transfer their crypto to USDT and hold risk-free, you now enable the selling of a cryptocurrency asset in exchange for an unverified USD-peg which essentially creates money out of thin air – money that should be issued/backed by the US Federal Reserve at the very least.
Now what happens in the scenario where Big Whale cashes out $100MM Bitcoin to Tether (USDT) and then Tether is found to be fraudulent? He doesn’t get his funds. Now multiply this 14x – $1.4B which is the total market supply of Tether.
While only existing as .2% of the total market capital in cryptocurrencies, rising Tether supply means an increased systemic risk whenever an audit is failed (and trust me, it will). Or hell – if Tether cannot payout when the masses of whales want to pull out of the market in a panic, then you have hundreds of millions of “fairy funds” disappear.
What’s incredible is that this is only one leg of the “dumb money bubble” and it only gets worse.
Recent pump and dump schemes have the market witnessing 5000% returns in minutes, from coordinated efforts where the low-level end-user is the sucker left paying the tight-knit pumpers.
It’s not natural for anything to have a rally greater than 100% in a single day, and no more than 300% in a week. These are subjective numbers, yes, but in crypto world you will find they are all the more subjective. Based upon market cap, circulating supply, and current exchange listings, cryptos can see healthy & stable prices between the 100-300% growth zone.
Beyond this, however, the market requires time to reflect the increase in price; it has to be warranted.
Additionally, we have the Wall Street money, the global GDP, the 2x, 3x, and 6x leveraged derivatives players who are bringing big money to the table. Even if we see 1% of all these funds combined, we see the entire cryptocurrency market cap increase by $2T – and with it being close to $1T already this brings the total to $3T. We will see that in the next year alone.
There is INCREDIBLE money to be made here, especially in the Top 10 / Top 25 coins on the market today.
But there are also incredible losses to be had at the breaking point – not a bubble per se, but a systemic point of failure leading to a major correction to the mean.
When will this all happen?
I am no Nostradamus, I am no Doomsayer. I call it like I see it and adjust my opinions based upon new, factual data.
I find that the cryptocurrency markets do not behave similar to any other financial markets out there. Sure, technical analysis can get you far, but only so far. You have to be able to map human emotion on the trading level – greed and panic.
Master those two and you have the ultimate money-making formula during this digital gold rush.
That being said, I see our pace accelerating to a $3T total market capilization by Q1 2019. At that point, if we surge to $5T+ there will be a major 60%+ correction to the mean (most likely $2T price-levels at that point). If we do surge, this will be around Q2 2019. Otherwise, if minor corrections of 20-40% are witnessed and prices swing on the monthly or quarterly, then I’d peg 2020 as the year we see an incredible push to $5T… and perhaps then, it will be stable growth.
Then again, this whole thing could pop tomorrow from incredibly bad news (not FUD), next quarter because of Tether FBI/IRS RICO, or next year when we hit $3T.
There’s no exact telling, but someone has to be the weatherman in these monsooning times. Capital flying in from left and right, insane valuations, crazy deflations, pumps, dumps, and all the rest.
Best of luck trading – and remember, Tether is a scam.
Previous story .
