Consolidation Is The Only Possible Outcome After Coins Die
Conventional wisdom leads to conventional mistakes. Recently a Bloomberg opinion piece from Aaron Brown over simplified cryptocurrency markets for readers who have just 5 minutes to take some information in.
That approach is as conventional as cryptocurrency markets are unconventional. Hopefully we will be able to enlighten our readers in the same 5-minute time span, while we expose the perils of this conventional approach.
Brown focuses his opinion piece on the top 10% of the coins in the market. He calls most of them dead wood and proceeds to claim that investors have abandoned many of them already. This, according to Brown, leads to a dearth of development which in turn should be reflected in diminishing prices.
The issue is that these coins were not necessarily created to become investment vehicles. These are not companies — which Brown merely alludes to — but rather micro economies. They should be taken as such.
Cryptocurrency projects posses a wealth of assets that can be used in different ways. Furthermore, the assumption that developers abandon projects due to price changes should be challenged, much like the idea that a wealth of developers is always beneficial.
Litecoin is probably the best example of how Brown’s conventional wisdom will inevitably lead to conventional mistakes. Despite its price woes, Charlie Lee, Litecoin’s creator, came back to the project as a full-time contributor and has stuck with it despite the price change. Moreover, Litecoin:
· Lead SegWit implementation with a fraction of the developers that Bitcoin has
· Is implementing MimbleWimble as a layer-2 solution to give users added privacy
· Continues to be a reliable coin that is more widely accepted as a medium of exchange than EOS, Binance Coin, Basic Attention Token and Freicoin, which Brown points to a the coins that “have demonstrated strong price action in good times and bad.”
Brown then proceeds to turn your attention towards coins like Bitcoin SV, just because they were “introduced to the public after the peak.” Conventional wisdom would tell you that you might find the next Bitcoin — or the next unicorn that will make you tons of fiat — there.
To be fair, Brown is not telling you to invest and he warns that the whole space could be worth $0 tomorrow. Nevertheless, an argument that centers around price as a proxy to measure the project’s capability to attract and maintain brilliant developers, can never be followed by asking you to pay attention to a coin created from a fork of a fork of Bitcoin that relies 100% on someone claiming to be Satoshi.
If you are looking for the next Bitcoin, you should put your money in BTC. Bitcoin is the next Bitcoin. This is because when coins die, capital concentrates at the top of the market. Not on coin #53 on CMC, but at the very top, which outside the most dominant coin — Bitcoin, which commands a bigger share of total cryptocurrency market cap — is probably comprised of 15 out of the top 20 coins.
Some of Brown’s “dead wood” is right there, within that thin slice of a 10,000+ coin market. A wider and deeper look at cryptocurrencies will show you that the best indicators are actually at the very bottom. Conventional wisdom narrows your vision to the point that you can miss the opportunities you can find in market consolidation.
Contrary to Brown’s assertion, deadcoin assets can be consolidated just like company assets can. It is important to keep on thinking about coins as micro economies, or tiny nations if you will. Consolidation comes in the form of a sort of “federation” under the banner of a coin that can process deadcoin assets, put them to good use and integrate the “citizens” of those tiny deadcoin nations.
This consolidation favors top ranked cryptocurrencies, but it also benefits deadcoin holders while general market dilution is reduced.
That idea is probably too unconventional for Brown to even look for, but it exists, and its name is CoinJanitor.
So, instead of treating the space as an alternative market for high risk investments that could give you a quick turn around in fiat, you ought to ditch conventional wisdom and see it from the perspective of those who believe in its fundamentals.
If you are capable of doing that, you will probably find yourself holding your own coins instead of keeping them on an exchange to take advantage of a fleeting opportunity to make a few bucks.
You might be more careful about the coins you buy as well, going beyond all that technical analysis and all the historic data that shows you how the past looks like but doesn’t offer any clarity about the future.
Maybe, if you take the time to understand how the space really works and you start believing in its fundamental virtues, you will also see how consolidation is the only possible outcome after coins die, and you might also be able to profit from the unconventional task of contributing to the consolidation process, instead of dismissing it.
P.S. Exchanges are the next big domino that could fall in the space because just like coins, there are too many of them and saturation leads to consolidation. Make sure you pick your favorite exchanges wisely!
Published at Wed, 05 Feb 2020 07:01:34 +0000
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