Thread by @SpartanBlack_1

0/ Let me share my perspective on this since I was around in 2017, have strong views on DeFi and also hold $LINK.

Disclosure: we are early DeFi investors and we hold $LINK, and more than 2 dozen other assets incl many DeFi ones.

https://twitter.com/cryptowhale/status/1294406140080660480

1) in every innovation cycle there is bound to be a major bubble. This happens in the stock market and also in crypto. Why? Because these innovation cycles represent a breakthrough and it gets people excited which unleashes animal spirits and greed.

2) In crypto, we saw this in 2012-13, 2016-17 and it is happening again. Are bubbles bad? Not necessarily. It creates incentives and draws in talent to innovate. It also generates the capital to enable these innovations.

3/ Due to the abundant capital, fraudsters are also attracted to the space unfortunately who have no interest in building anything but are just looking to make a quick buck off others. These are the guys we need to guard against. They were here in 2017 and they are back again.

4/ In a crypto bull market, everything goes up a lot. This is not surprising as it is a small and volatile asset class. Often the lower quality assets rise even more in value because they were so bombed out before or because so little expectations are priced in.

5/ In a crypto bull market, almost all assets will go up significantly in value even if the project has little utility or traction. Why? Crypto is early, hard to value, so meme value often trumps fundamentals.

6/ By definition, if most assets go up a lot, at some point, the bubble will burst and almost all assets will correct sharply. This has happened multiple times. The less mature the asset and the weaker the fundamentals, the sharper the correction will be.

7/ Post 2017 bubble, $BTC dropped by 83%, $ETH by 94% and other crypto assets fell even more. Does that make $ETH and all the other assets a scam or Ponzi scheme? No. In fact many of them have proven resilient and their founders have continued to build and innovate.

8/ In 2016-17, the rage and hype were Layer 1 projects. Projects that seemed promising or had professor-founders commanded multi-billion $ valuations never mind that they didn’t even have a testnet up and running.

9/ In 2020, the hype and attention is on DeFi and not surprisingly the big gainers are DeFi and DeFi related tokens incl oracles such as $LINK.

10/ Are DeFi tokens overvalued? I don’t think so. They have gone through a fundamental re-rating driven by increasing adoption accelerated by yield farming strategies in some cases. Compared to 2017, DeFi tokens are nowhere close to being as overvalued Layer 1 projects then.

11/ In fact, my view is that we are quite some distance to the top both in terms of price and time. However I know some people did learn hard lessons in 2017 and that probably is deep in their psyche and affected their risk tolerance.

12/ Will DeFi tokens and crypto assets become grossly overvalued at some point in this cycle. Yes.

Will the majority of tokens fall by 90% or more? Probably.

Are they all scams? Probably not but there will be many.

13/ Zooming in on Chainlink.

Is Chainlink a scam? - No

Is it the leading oracle today? - Yes

Does Chainlink have network effects? - to some extent

Does Chainlink have superior “tech”? - debatable

14/ Is it the perfect oracle solution that will be the sole winner? - Very unlikely

Can $LINK continue to go up? - Yes

Will it correct sharply when this bull market ends - Likely

Will it go to $0? - Very unlikely.