Why this crypto market collapse is actually a good thing in the long run!
Once again the crypto market is melting down, and having been in the crypto market since 2013, it really doesn't bother me. I may sound weird, but it doesn't. I am confident that in the long run, crypto (at least some crypto currencies) is the way to go. Certainly for a big part of your assets. (But always spread wisely into different assets)
Today is havoc all over the place, I even heard it on the radio in the mainstream news, which is not very usual. People are running scared to the exit, while staying calm is the only way you will get through to the other side. Because, believe me, there will be another side. There always is.
Many reasons are being named as the culprit for this crash, collapse, meltdown, etc... Like the interest rate hikes of the FED and ECB, the high inflation, the war in Ukraine, Celsius being in dark water, LUNA,... In my opinion it has something to do with it, but the main reason is "The market is over leveraged" And by that I mean, it is not about crypto anymore these days, it is all about DEFI, yield hunting, over tokenization, algorithmic stablecoins, etc... Those are all derivatives of the crypto currencies that are supposed to be backing them. But they haven't been backing them from the beginning. Most of the DEFI projects are clear inflationary projects, in which the bagholders are left with worthless coins, that are in fact backed by nothing. That is just a clear truth. @chekohler wrote a great post about this this morning. Most of DEFI is the poison that is running the market down right now. See it like this, why was Bitcoin, Ethereum, Litecoin, etc... so interesting to investors the last decade. Because of the fact that there is no inflation, no coins are being minted extra, like with the central banks. But what does DEFI do, tokenise, and create more tokens, if possible billions and trillions. That is the exact opposite of why people got attracted to Bitcoin and others in the first place.
What is happening right now, is a good thing for the crypto market in general. All the risky and bogus projects that work on minting extra coins, or on leverage, will be completely flushed out of the markets because of this collapse. And believe me, that is a really good thing. It will bring crypto back to its essence, decentralisation and a fixed amount of coins or tokens to be minted.
That will make crypto attractive again, especially because of the fact that bargains are available on the markets right now. Sad for the people that will get flushed away by this tsunami, but they will learn from this. Trees don't grow into the sky, and they never will. Returns on DEFI of 100, 200 or 500 % are just not sustainable. They never were, and never will.
Crypto currencies itself are the important part of this market, and that is finally a fact again. So, keep an eye on it, but eventually this will pass too. And the Hodlers wil be content. The DEFI bagholders wil be pissed, but that is just part of the game. Let the dirty oil run out of the engine, and think again about what crypto currencies are all about, decentralization and a fixed nummer of coins. If that is the reality, the markets will raise again, and the trust in crypto will come back. But not before a ton of money gets flushed out of the markets.
Let's turn back to simple crypto, the sooner we do it, the better it is for the market!
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