My Concern with Crypto

in #blog3 months ago


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I will start by saying that I am a long term believer in Blockchain technology and the implications of increased development and adoption will have on the cryptocurrency asset class. However, I have recently seen a number of trends that have made me a bit concern in the short term. Most of it has to do with the still immaturity of the asset class and the lack of adoption in the number of use cases despite the expansion of network effects we continue to see.

One of the concerns is due to the recent increases seen which echo those of prior cycles which have not ended well. You can call it a behavioral reaction many call the "snake bite" effect but it feels off. When we see this "bubble-like" movements with many other markets which have left the rationality of traditional valuation models, it feels as if the upside is limited while risks remain.

I think that the asset class has been more defined as a risky asset class rather than a disruptor or innovative asset class. I say this as it seems that there has been more correlation to assets like risky stocks that other assets that are more safe havens. Like seen in the beginning of the Pandemic collapse, everything was sold in search of liquidity; even the ultimate safe haven by mosts, Gold. I fear that when (not if) the time comes for a reset, many cryptocurrencies will fall victim to the indiscriminate selling of assets.

I wish I could think of a solution but with an asset class still immature, the hedge opportunities seem limited although I am searching for them. I have thought about taking profits but as I have said many times, my timing is awful. I also have a long term belief in the value of the asset class as a hedge and more important a way to become more monetarily sovereign. Time will tell but my risk management hat is surely leading the way for me.

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