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… 📈📉

Altcoin Psycho @AltcoinPsycho

“Not out of the woods yet” “Do or die here” “Hold this level or its over”

starbust @inversebrah

don't forget to hedge ur tweets today

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:

Will Clemente @WClementeIII

Bear case: - Price action looks like a failed macro breakout, still need to reclaim $60K-$61K - OI excluding CME and Perp OI near ATHs in USD & BTC terms - Regime of positive premium/funding, L/S ratio w no reset - Funds sitting on large uPnLs for 2021 - Macro uncertainty

Will Clemente @WClementeIII

Bull case: - OC supply dynamics: illiquid supply, LTH supply, HODL waves, etc. - OC oscillators never reached exuberance/reset over summer - Summer included OC behaviors that resemble bear market - Funds have fresh PnLs in January, hunger to take on risk - Macro uncertainty

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.

Andrew 🇺🇸 @andrewchen

anyone who thinks web3 is a passing fad or bubble isn't seeing the insane number of very legit consumer startup teams pivoting straight into the space... These folks are experts at building games, communities/social apps, creator economy, etc. 2022 is going to be wild

Tim McDonald @trmcdonald

I met another bright young banker/analyst today going all in on crypto. The caliber of talent going into this space is overwhelming. Why would any young finance professional not get on board this freight train?

• Meanwhile, a small cohort of people and companies has yet to get the memo that the Web 3 revolution is just around the corner!

Wu Blockchain @WuBlockchain

Charlie Munger, 97-year-old vicechairman of Warren Buffett: I’m never going to buy a cryptocurrency. I wish they’d never been invented, Chinese made the correct decision, which is to simply ban them. My country has made the wrong decision.

smh.com.au‘Crazier than dot-com era’: Charlie Munger lashes crypto, wary of booming marketsWarren Buffett’s 97-year-old right-hand man says the current investing climate is more volatile than the dot-com bubble two decades ago, as he dismissed the surge in cryptocurrencies, saying he would never own one.

SwagtimusPrime.eth 🦇🔊🐼 @SwagtimusP

Steam will give you a trading ban for 3 days, email + 2FA verification (which resets your trading ban for another 3 days) And they don't give you free money and take horrendous fees and you don't own the skins/items I call this an absolute win.

Immutable | $IMX | Hiring!👇 @Immutable

> Trading your favourite skins in a game? You get $IMX. > Trading on a marketplace like @opensea @TokenTrove or @mintable_app? You get $IMX. > Trading your favourite centralized database entries on @Steam? ...

… 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.

Lyn Alden @LynAldenContact

@gamesblazer06 Bitcoin harnesses Moore's law as part of its design. Most blockchains are indeed probably going to be worth a lot less in the future than they are now. Likely a bubble for the majority of them here. Then another cycle...

6529 @punk6529

the actual conclusion is that we live in a weird degen bubble. $50K is a lot of money in the real world.

NateAlex @NateAlexNFT

Holy fuck this guy made a whopping 50k in only 4 years of crypto investing!!!! https://t.co/R2ru6SMgL2

• 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.

Tyler Reynolds @tbr90

As I’ve been saying for months, this remains the biggest threat to both equities and crypto Nasdaq fell 73% when the dot com bubble burst Crypto will be much much worse Luckily, no rate hikes until after Powell is re-confirmed (or ditched) in February

Keith Rabois @rabois

Amazingly, many journalists & people in tech don’t appear to know that the proximate cause of the “Internet Bubble” collapsing was Greenspan/The Fed raises interest rates.

Lisa Abramowicz @lisaabramowicz1

Homeowners are borrowing money against the value of their homes at the highest volume since the financial crisis. Many are using the cash for renovations; others are using it to buy stocks.

bloomberg.comBloomberg - Are you a robot?

Meet Kevin Paffrath @realMeetKevin

A “ingredient of a #bubble” market is when “every threat is viewed as empty” and an excuse to #BuyTheDip. $VTI $VOO $SPY are receiving record inflows. Does any of this make you nervous? (Poll in part 2).

Gary Black @garyblack00

Today was the 3rd time time this year when the market erased all loss after a 2% beatdown. In the past two decades this has only happened twice. This happens because retail investors are trained to buy the dips. As long as equities are cheap vs T-bonds this will continue. $tsla https://t.co/LmI7Snmz1F

• It’s important to put things into perspective, though…

kingdomdart 🔺 @satsdart

Bitcoin Maximalist @CWebline

@breakoutboi @satsdart A lot of these young folks will be completely caught off guard when the market goes full bear again. They have no sense of risk profile having not experienced a real bear season and will go from crypto millionaire to flat broke in a blink of an eye.

• 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.

Jason Choi @mrjasonchoi

15/ As one example - in the same time that P2E entered into bubble territory, DeFi has been in a year-long bear market. Returns measured against ETH: $AXS +4242% $YGG +192% $ILV +896% $SUSHi -80% $SNX -90% $CREAM -98%

Jake Chervinsky @jchervinsky

@gladstein Meme & joke coins have performed better than every investment asset on Earth, not just serious coins in crypto.... I'd guess because of illiquidity causing big price moves based on small net inflows, & a speculative bubble caused by money printing & gamification of trading.

• 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:

Santa-iago R Santos | #9159 🦇🔊⚡️ @santiagoroel

Volatility is your worst fear/enemy when you don’t have a sound thesis and portfolio construction. It’s an opportunity when you do.

SHELDON EVANS @SheldonEvans

Being emotionally attached to your investments will make you lose money. Realising that most people are emotionally attached to their investments will make you more money than you can imagine.

DCinvΞstor @iamDCinvestor

gaining perspective is expensive it normally requires losing and taking it on the chin the key is to 1) take risk management steps to minimize the severity of inevitable losses (read lessons) and 2) internalize those lessons through adapted behavior easier said than done

DCinvΞstor @iamDCinvestor

@nanexcool @ledgerstatus @DeezeFi @BanklessHQ there is extreme confirmation bias in the space because you only hear stories from those who risked it all and are still here everyone who lost it all (most) are long gone proper risk management and sizing allows for high conviction holds through volatility this is the way

4156 @punk4156

even if the skeptics are correct and it's all going to zero, not participating is still a bad risk:reward. the most you can lose is 100%, and the upside is many multiples of that. the only rational thing to advocate for is partial participation & conservative risk management 1/2