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Crypto markets have been in a tailspin for the last eight months.
At the all-time high earlier this year (Jan 7th), the industry’s market cap reached $829 billion. Since then, the market has lost ~$600 billion and yesterday was the first time crypto dipped below a $200 billion market cap since November 12, 2017.
While no crypto asset has been immune to the drawdown, Bitcoin maximalists are enjoying the fact that Bitcoin has suffered least (-57%). XRP has been the biggest loser in major cryptocurrencies with an astounding -89%. (It would be impossible for me to mention XRP’s price without linking to the now infamous CNBC segment on the exact day of the top of the market).
The negative price action has obviously hurt a lot of retail investors. They were signing up in droves during the final 45 days of the bull run (November & December), including 100,000+ people per day on Coinbase. These new users were likely caught up in the hype and fear of missing out.
While those retail investors have taken large losses, many crypto infrastructure companies continue to grow profitably. Coinbase is signing up 50,000+ people per day globally. Bitmain cleared $1.1 billion in profits during the first 3 months of 2018. Binance is reportedly on track for $1 billion in 2018 profits as well.
This isn’t the first time we have seen this phenomenon. During the Gold Rush, some speculators made money and some speculators lost money, but the businesses selling picks and shovels had the most attractive profits. It pays (literally) to provide the tools and infrastructure.
As I tweeted on January 7th this year, “Trying to guess which assets will be the winners is fool’s game for most. Instead, I invest in hard assets that appreciate in value and drive cash flow as the overall industry grows. Less upside with higher confidence.”
Companies like Coinbase, Bitmain and Binance will continue printing money, regardless of whether the crypto markets fall further or comes roaring back. Human psychology pulls retail investors into games of speculation and gambling. Smart money doesn’t gamble, though.
The smart money backs world-class entrepreneurs who are building tools and infrastructure. They aren’t interested in fast money. These teams are interested in who survives.
Ethereum’s Joseph Lubin: Crypto price collapse will not hinder growth: Ethereum co-founder Joseph Lubin said this past year’s surge in the value of digital currencies was a bubble and the burgeoning ecosystem is stronger because of it even as prices tumble. He added that “trader types” are driving volatility and isn’t concerned that the slump in prices will slow down the development of core infrastructure and adoption. Read more.
Xapo President warns of altcoin ‘extinction event:’ On Tuesday, Bitcoin prices fell below $6,000 for the first time since the end of June. Xapo president Ted Rogers considered current conditions conducive to producing an “extinction-level event” for cryptocurrencies en masse. “90%+ of CoinMarketCap list will disappear eventually - might as well happen now,” he warned Monday. Read more.
Playboy sues Canadian blockchain firm for fraud and breach of contract: Playboy Enterprises is suing a cryptocurrency technology company on allegations of fraud and breach of contract, claiming that it failed to live up to an agreement to integrate blockchain technology into Playboy’s online media channels. Read more.
Venezuela to peg pension, salary systems to Petro cryptocurrency: Venezuela is set to begin using its "petro" cryptocurrency as an official accounting unit, according to the country's president. As part of the change, the state oil and gas company Petróleos de Venezuela will reportedly begin using the petro as a mandatory accounting unit. Read more.
SEC slaps 'fraudulent' ICO founder with $30K fine, lifetime ban: The SEC announced Tuesday that it had secured new prohibitions against the founder of a company behind an allegedly fraudulent initial coin offering. The agency said that it obtained officer-and-director and penny-stock bars against David Laurance and his company, Tomahawk Exploration LLC. Tomahawk, the SEC alleges, sought to raise funds through a "Tomahawkcoin" token sale that utilized misleading marketing materials and false claims about oil drilling licenses. Read more.
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Nothing in this email is intended to serve as financial advice. Do your own research.