Is crypto going to 0?
Let's explore what could kill crypto.
๐ ๐งต [1/x]
Let's explore what could kill crypto.
๐ ๐งต [1/x]
![Is crypto going to 0?
Let's explore what could kill crypto.
๐ ๐งต [1/x] https://t.co/AO3QIeZzb3](https://pbs.twimg.com/media/FVwRay0WUAE8Kjm.jpg)
You can also find this thread as a blog post on @0x_illuminati at 0xilluminati.com
@0x_illuminati The last couple of months have been BRUTAL for anyone invested in crypto.
In a bull market, there's an endless parade of moonboys predicting $1M BTC.
In a bear market, there are just as many doomsdayers calling for $0 BTC.
In a bull market, there's an endless parade of moonboys predicting $1M BTC.
In a bear market, there are just as many doomsdayers calling for $0 BTC.
@0x_illuminati Given recent events, I went back to revisit my fundamental crypto investing thesis to see if it has been invalidated.
In this thread, I'll explore:
โข My long-term thesis
โข Where I could be wrong
โข How crypto could go to 0-ish
โข Non-doomsday bear cases to consider
In this thread, I'll explore:
โข My long-term thesis
โข Where I could be wrong
โข How crypto could go to 0-ish
โข Non-doomsday bear cases to consider
@0x_illuminati My fundamental thesis:
I believe crypto/web3 will be used to create useful financial products over the next decade that will provide better financial access to people around the world.
I believe crypto/web3 will be used to create useful financial products over the next decade that will provide better financial access to people around the world.
@0x_illuminati As an investor, this can be simplified to:
โ Valuable products are built using crypto
โ crypto adoption โ
โ coin prices โ
โ Valuable products are built using crypto
โ crypto adoption โ
โ coin prices โ
@0x_illuminati My thesis could be wrong if:
โข No useful financial products are built using crypto.
โข Adoption is killed by government bans, macro recession, loss of trust, etc.
โข Winning projects aren't investible (don't exist yet, don't offer coins or coins don't capture value, etc)
+++
โข No useful financial products are built using crypto.
โข Adoption is killed by government bans, macro recession, loss of trust, etc.
โข Winning projects aren't investible (don't exist yet, don't offer coins or coins don't capture value, etc)
+++
@0x_illuminati So what can kill crypto, and cause prices to go to 0-ish? ๐
@0x_illuminati *** US Government bans the use of crypto ***
This could kill crypto.
But crypto is censorship-resistant, and no one can "ban it"... right?
This could kill crypto.
But crypto is censorship-resistant, and no one can "ban it"... right?
@0x_illuminati Technically yes, but if the fiat โโ crypto onramps/offramps are banned, crypto dies.
99% of people will not want to own crypto if it is illegal and not convertible for fiat.
99% of people will not want to own crypto if it is illegal and not convertible for fiat.
@0x_illuminati US lawmakers have said in the past that they do not intend to ban crypto, just regulate it.
Regulation is good - it brings trust and safety, which allows for retail and institutional adoption.
So perhaps a US crypto ban is not very likely, but it's always a looming threat.
Regulation is good - it brings trust and safety, which allows for retail and institutional adoption.
So perhaps a US crypto ban is not very likely, but it's always a looming threat.
@0x_illuminati *** Major ETH failure ***
Example: The Merge goes bad and the ETH network fails catastrophically.
I imagine that would crash ETH and probably the whole market too.
Example: The Merge goes bad and the ETH network fails catastrophically.
I imagine that would crash ETH and probably the whole market too.
@0x_illuminati But @ethereum's ropsten testnet completed its merge successfully a few weeks back, so a catastrophic failure in the mainnet merge is very unlikely.
@0x_illuminati @ethereum *** USDT / USDC collapse ***
Tether collapsing would make UST/LUNA look like sunshine and rainbows.
USDT has been around for a long time, and there's a lot of $ riding on the belief that they have the cash to back their tokens.
Tether collapsing would make UST/LUNA look like sunshine and rainbows.
USDT has been around for a long time, and there's a lot of $ riding on the belief that they have the cash to back their tokens.
@0x_illuminati @ethereum Stablecoins are a critical part of crypto for investor, traders, farmers, protocols, VCs, institutional investors, and basically everyone in the space.
Many crypto projects have their treasury in stablecoins as well.
Many crypto projects have their treasury in stablecoins as well.
@0x_illuminati @ethereum Tether (USDT) and USDC have a combined market cap of $100B+.
If either collapses, it could lead to a domino effect where a massive amount of value is wiped out quickly.
The world will also lose trust in crypto if this happens, and it will be very difficult to recover from this.
If either collapses, it could lead to a domino effect where a massive amount of value is wiped out quickly.
The world will also lose trust in crypto if this happens, and it will be very difficult to recover from this.
@0x_illuminati @ethereum Tether's website says assets are 100% backed by reserves.
So far, Tether has been able to pay everyone who's tried to redeem USDT for fiat, but Tether FUD is still haunting.
So far, Tether has been able to pay everyone who's tried to redeem USDT for fiat, but Tether FUD is still haunting.
@0x_illuminati @ethereum Some other (non-doomsday) bear cases to consider ๐
@0x_illuminati @ethereum *** Coins don't capture value ***
The majority of crypto buying is driven by speculation.
The tokenomics (burning, locking, etc) can increase buy or sell pressure a bit, but the price is still driven by investors, not users.
The majority of crypto buying is driven by speculation.
The tokenomics (burning, locking, etc) can increase buy or sell pressure a bit, but the price is still driven by investors, not users.
@0x_illuminati @ethereum For example, last year, the ETH network settled $5T+ worth of transactions.
Suppose in 5 years, the network is settling 50T+ worth of transactions.
Is it possible that the $ETH price doesn't go up much even though value settled on the network increases?
Suppose in 5 years, the network is settling 50T+ worth of transactions.
Is it possible that the $ETH price doesn't go up much even though value settled on the network increases?
@0x_illuminati @ethereum What if the networks/apps gain adoption, but the tokens don't accrue much value?
@0x_illuminati @ethereum Or what if the networks that gain adoption aren't investible?
For example: @jack's latest project "Web5" has no tokens.
For example: @jack's latest project "Web5" has no tokens.
@0x_illuminati @ethereum @jack *** Severe Economic Recession ***
One of Crypto's momentum drivers is price.
Price โ interest / adoption โ developers โ adoption / price.
Crypto has never been through an economic recession, and there's a lot of pessimism about what this will mean for coin prices.
One of Crypto's momentum drivers is price.
Price โ interest / adoption โ developers โ adoption / price.
Crypto has never been through an economic recession, and there's a lot of pessimism about what this will mean for coin prices.
@0x_illuminati @ethereum @jack Downward coin prices means fewer devs, lower interest, and adoption.
Long bear market = less attractive risk/reward for investing in crypto.
Long bear market = less attractive risk/reward for investing in crypto.
@0x_illuminati @ethereum @jack Currently, Markets are crashing for a few reasons:
1. Inflation
2. Rising Interest Rates & QT
3. Uncertainty from War
4. Looming Economic Recession
5. Cascading liquidations from LUNA / UST collapse and reckless leverage (crypto-specific)
1. Inflation
2. Rising Interest Rates & QT
3. Uncertainty from War
4. Looming Economic Recession
5. Cascading liquidations from LUNA / UST collapse and reckless leverage (crypto-specific)
@0x_illuminati @ethereum @jack Nothing has fundamentally changed that invalidates my hypothesis.
So, I am fundamentally still bullish on crypto in the long-term.
So, I am fundamentally still bullish on crypto in the long-term.
@0x_illuminati @ethereum @jack No one knows what will happen.
This is just one model or lens for looking at the market.
"All models are wrong, some are useful".
This is just one model or lens for looking at the market.
"All models are wrong, some are useful".
@0x_illuminati @ethereum @jack What other factors could completely destroy the crypto market?
I'm curious to hear other possibilities I might not have considered...
I'm curious to hear other possibilities I might not have considered...
@0x_illuminati @ethereum @jack If you liked my framework for looking at the market, please like / retweet to share it along.
And follow me @shivsakhuja for more crypto insights, thought experiments & visual explainers.
And follow me @shivsakhuja for more crypto insights, thought experiments & visual explainers.
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