I had many hours of conversation with players from all dimensions globally in past 3 weeks (exchanges, traders, founders, miners, primary investors, regulators). Below are my key rationales why this winter will be worse than 2014's. Hope to be proven wrong 👇🏻
1/ Bitmain failing in IPO or performing poorly post-IPO (which seem likely) is a strong bear signal indicating even the most profitable player in crypto isn't accepted in capital markets. Bitmain’s lack of steady EBITDA is unavoidable due to the volatile nature of the industry
2/ Many of the highly anticipated projects who raised a ton of money will launch their mainnets in 2019, most will fail to meet expectations, all have to compete with the tiny group of dapp devs. Their underwhelming adoption and usage will be a further bear signal to the market
3/ The mining crisis is the worst since 2011, due to the “hash rate bubble” of 2017 when miners over-mined assuming price would keep going up and didn’t plan cash flow well. Many have to switch off now, and sell coins in reserve which they held, driving prices even lower
4/ Institutional buyers’ entrance is still far off. Most OTC desks are receiving more big sell orders than buy. What got many interested in the first place was the potential to hedge as "crypto has low correlation with stock”. But that failed to be true in recent dips for both
5/ The market is highly trading/speculation centric, most early bag holders have taken profits and are beginning to short to make more money. Very few are still investing in fundamental/talent retention, making if very difficult for those teams with a small war chest to survive.
6/ Unlike typical startup environment, all crypto assets are highly correlated. Primary investors are freaked out by BTC’s bloodshed and many have been burned by shitcoins that have reached almost 0. Many funds share same vintage have completely stopped investing, and liquidated
7/ Many devs in the space noticed the basic infra is incomplete, and protocol is not solving immediate user pain-points or creating new demand but rather a long term social movement and paradigm shift, hence give up trying under funding shortage and regulatory uncertainty
8/ after lots debates with committed players who hang up and folks who almost/already quit. I’m still SUPER bullish for the long term - the bear cycle will wash out LOTS of opportunists, who ever remains are genuinely believe in the industry/ethos and all in no matter what
9/ jurisdiction like Singapore is moving very fast on clarifying regulatory playbook and license qualification, with strong incentive to facilitate the industry and see it as great opportunity when US/China are indifferent/hostile towards it. straitstimes.com/business/compa…
10/ Incumbents, while try to be quiet and appear to be indifferent, are secretly working on stuff that may massively improve adoption and utility - those names are Facebook, Square, Stripe, PayPal, Alipay, etc. Many others openly get things prepared such as Fidelity and ICE
To conclude, the violent delight will have a violent end. Healthy consolidation and fundamental seeking will lead the industry to a eventual prosperity. We didn’t see another gold rush in internet after the dot.com bubble, but internet eventually eats the world
For whoever interested in mining economic overview and recent mining apocalypse please refer to an earlier thread On-site visit with key players and first hand drama watching are the best way to do reality check and information reconciling
