Thread by @cburniske

1/ Don't underestimate the strength of the #hodl meme. Until we have market completeness, hodlers will make #cryptoasset prices stickier than anticipated.

2/ Market completeness: "In such a market, the complete set of possible bets on future states-of-the-world can be constructed with existing assets without friction." en.wikipedia.org/wiki/Complete_…

3/ It's no secret the #crypto markets have a strong long bias.

Outside of the top 10 #cryptoassets, shorting is difficult, and even for the top 10, friction remains.

4/ Friction around shorting is the biggest contributor to lack of market-completeness in #crypto, but this is a temporary condition.

In time, the markets for the biggest #cryptoassets should become as liquid and efficient as the FX markets.

5/ But right now, combine lack of market-completeness with strong hodlers in each #crypto community & we have a recipe for stickiness.

Once the weak hands have sold, only strong hands remain (sometimes just the originator 🤢), and w/o shorting selling pressure dissipates.

6/ Layer on the "anchoring effect of bubbles," and many uninformed observers will view the 100th #cryptoasset on @CoinMarketCap at $30M network value and think -- that's cheap now!

7/ "Anchoring or focalism is a cognitive bias for an individual to rely too heavily on an initial piece of information offered (known as the "anchor") when making decisions." en.wikipedia.org/wiki/Complete_…

8/ Furthermore, as many have pointed out and I presented often in 1H 2018, network value is dangerous when used in isolation.

Yet, it's the most widely used "relative valuation" technique, and what most sites use as the primary metric to rank.

9/ Combine lack of market completeness (no sellers) + avid hodlers (stable-ish capital base) + "anchoring" off bubble prices + a troubled primary metric (when used in isolation), and we will remain in an irrational state for a long time.

10/ This is why I think it's misguided to expect hundreds of #cryptoassets to go to zero any time soon.

The bad ones will only go to near zero when the above issues are remedied, the most important factor being market-completeness, as it should force the other 3 into line.

11/ And if market-completeness isn't remedied before the next lift-off (which I don't think it will be), watch out-- the 2017 bubble will look quaint.

12/ In the next bubble, the main thing that will impinge upon opportunists' potential to profit from insane price spikes in useless #cryptoassets will be lack of liquidity for the long tail, tho pump-groups can entice unwitting buyers, providing liquidity for large sellers 😔

13/ It's somewhat grim, as lots of potential for manipulation remains for the foreseeable future, particularly for the long tail of #crypto - so be careful out there.

14/ My solace is that #cryptonetworks providing real utility to the world are the only ones that have a *natural* tendency towards completeness, rationality, and liquidity between the supply-side, demand-side, investors and traders.

15/ Lastly, I think our best bet at "market-completeness" in the short-to-medium term will be a protocol-based solution that collapses the cost of derivative creation & thereby shorting.

One of the many reasons why @placeholdervc invested in @UMAprotocol: medium.com/uma-project/um…