Cryptocurrency “W Shaped” Recovery Thesis
Hi, Miko here.
I know people have been talking about crypto spring and enjoying the warm weather and rise in the price of Bitcoin. None of this blog post should be considered investment advice.
There is even talk of a “V” shaped recovery, or sharp rebound.
I think we have seen a recent lift, as a superwhale blasted through resistance levels and in fact liquidated 500M dollars worth of short positions. Those positions are likely blown out never to return.
Good thing about a wipeout like that is that we had an overhang of short sellers who will probably never return to this space… these were the “Bitcoin Zero” crowd who were convinced they could short Bitcoin all the way to zero.
Having cleared away the ghosts of “Bitcoin zero” we are still not in smooth sailing territory. We are still being lifted and lowered by speculation and by pump and dump. We wont see sustainable recovery for some time, and we will continue to see resistance levels as people previously burned try to get out at various price levels.
There are certainly major potential upside “dark horses” such as increased volume from areas like Brazil, Argentina, Venezuela and other countries where the local currencies are experiencing hyperinflation.
But the long awaited institutional adoption is slow in coming, there’s no sizable liquidity in “Security Token” and major crypto companies like CoinBase and Kraken have lost their heads of institutional product, suggesting that their businesses in those areas are not growing like gangbusters.
One of the hopes on the horizon for mass consumer adoption is the appearance of crypto payment associated messaging products such as Facebook, Telegram, Kik Messenger, Line, Kakao, Signal and others, all who have been written about as having significant blockchain projects in the works. When the messengers become wallet providers, significant volumes can be attained and new platforms will be formed.
Another promising area that may be combined with messengers (and wallets and exchanges) will be gaming (including but not limited to gambling). We will see the convergence of messengers which will bring users, platforms which will bring cryptographic assets and wallets and games which will bring functioning in-game economics. At the moment we principally have currencies that are looking for economies, but no real robust economies. In gaming we have lots of in-game economies but not enough currency. We will see the rise of game platforms that combine cryptographic assets with messengers within 2019 and many more larger ones in 2020.
Until we see some fundamental growth in volume, whether driven by nations, institutional adoption or by messengers and game platforms, we will continue to be in a purely speculative pattern, and we may see what I call the “Elmer Fudd” W shaped recovery which looks like WWWWWWWWWW (Wabbit).
The “V” shaped recovery I call the “Crypto Winter” thesis, because after winter there’s spring.
The “W” shaped recovery I call the “Nuclear Winter” theory. I think we may have many W shapes in a row because even with the “Ghost” of Bitcoin Zero banished, we still have ghosts like for example the ghost of Tether. We are still weeding through all of the scam ICOs.
One vector that may contribute to the rise of fundamental value in the cryptographic asset space is the rise of the IEO or Initial Exchange Offering. While at first I was skeptical about such offerings, speaking with the CEO of a major exchange and the CEO of a company that successfully completed an IEO actually got me to thinking that this might be a positive thing. Unlike ICO where there was virtually no diligence and no discernment, the diligence is now being outsourced to Exchanges. While historically exchanges have no track record doing diligence on companies, in the long run, exchanges that launch lots of shitcoins will impoverish their user base, which will eventually run out of money or realize they are being scammed over and over. Exchanges that exclusively list very good companies that add value to the economy will enrich their user base and eventually will increase their assets under management.
The last shape of recovery which we can theorize is what I call the “L shaped recovery” which is the thesis that it stays flat and simply doesn’t ever recover, at least for a long time. This scenario I call “Ice Age”, where winter goes on and on for years until the entire planetary biosphere is changed and the fate of species on earth is forever altered.
At the moment, I am favoring the W shaped thesis, with a possible multiple W time until we see the rise of mass adoption through messengers, gaming and the like.
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