December 3, 2021
December 3, 2021
Is Crypto In a "Dot-Com"-Like Bubble?
Introduction
The crypto markets haven’t been particularly interesting in the last couple of days… So, if you’re still here and educating yourself, you are one of the few who do the extra work when most people turn away. If you play your cards right, you will likely get rewarded sooner or later!
With the lack of direction of crypto prices and no clear catalysts in sight, crypto is currently following the stock markets’ lead – which are clearly in a quite nervous and volatile state right now… 📈📉
Market Outlook
With the macro outlook looking somewhat uncertain, it’s currently hard to have strong conviction in any short-term price scenarios. Will Clemente did an excellent job laying out both his bull and bear case for the weeks and months to come:
Crypto and Web 3 Are the Future…
While crypto prices have been in limbo recently, the signs that crypto and Web 3 are the future are clear as day.
Meanwhile, a small cohort of people and companies has yet to get the memo that the Web 3 revolution is just around the corner!
… But Probably Also In a Bubble
Here comes the cautionary part: As with every emerging technology, speculation and hype will override fundamentals from time to time. That’s why the Dot-com bubble, after creating and destroying incredible amounts of capital around the millennium, nonetheless laid the foundation for one of the pillar technologies of the modern age.
Coupled with the fact that not just crypto but ALL asset markets are in bubble territory (especially stocks and real estate), the risk for a systemic “deleveraging” at some point in the not-so-distant future surely exists.
It’s important to put things into perspective, though…
The big question is, what happens IF the “everything bubble” bursts? Our base case is that after a possible “deleveraging” of global asset markets, hard assets will capture the bulk of the rebound (as happened after the crash in March 2020). How low crypto prices will go in case of a massive macro liquidity event is anyone’s best guess…
While the scenario of one giant crypto bubble is undoubtedly imaginable, another scenario (which we already see today) is the emergence of several sector-specific “mini bubbles” within the broader crypto market.
Given that the late stages of a bubble are the most profitable, the key question becomes: How should we invest in this environment, and how do we spot the bubble top? The reality is that once a bubble pops, most people will not recognize it until it’s too late.
Since spotting the very top is nearly impossible even for seasoned investors, risk and portfolio management are vital for navigating a bubble. Here are some tips and ideas to think about:
Hey Oliver, loving the daily reports. And all the updates. I recently has a conversation with a less financial savvy but equally interested ellio follower. They had mentioned not understanding some of the information in the tweets. This was specifically in regards to the 10 year bond yield drops in Germany from a few days ago. One thought is to do a quick explanation on those charts to help improve the financial literacy of the followers. Other than that loving the content and staying up to date with the tweeters without having to go to Twitter. Look forward to where ET is going and as always...GB!