After the entire market capitalization of the cryptoeconomy dipped below $300 billion USD in the wee morning hours of February 6th, virtual currency traders started seeing prices not seen since months ago. Have the uninformed, purely manic profit chasers in the space been shaken out in favor of the cryptoverse’s stronger hands?
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Panic Sellers, Well, Panicked
The global cryptocurrency market has experienced a historic $550 billion dollar de-valuation over the past four weeks. To put that into perspective, the U.S. stock market lost more than $1 trillion last week, with its multi-trillion market cap still being considerably larger than the entire cryptoverse.
So cryptocurrencies got walloped even more severely in comparison. To that end, you don’t see $550 billion dissipate without a substantial amount of that sell pressure being panic selling — FOMO (“Fear on missing out”) in reverse.
And it’s people who bought at price peaks in late 2017 and early 2018 that comprised the majority of these sellers, many of whom presumably had their portfolio’s “rekt” in the process.
Szabo Talks Money-to-Knowledge Ratio
Among veterans of the cryptocurrency space in the second half 2017, the sentiment that a severe, greed-driven mania had infected newcomers to the ecosystem became ubiquitous.
A surge of amateur investors began pouring billions into projects that had completely unproven teams and unproven products. Why? Because they fell prey to greed rather than sticking to rational, calculating investment strategies. They invested on hearsay, not research.
Now, some crypto vets are saying the weakest of hands seem to have been all but shaken out at this point.
Take Nick Szabo — legendary cypherpunk — for instance. At the end of 2017, Szabo noted on Twitter that cryptocurrency prices “have gotten a bit noisier over the second half of this year with the big price run-ups. All the new money has given us a bigger $/knowledge ratio than at end of last year.”
And in a new tweet responding to this original comment, Szabo felt validated, suggesting investors have hitherto been buying projects on “next to no” research:
This turns out to have been an understatement. The recent big price declines have been largely indiscriminate. Most of those selling now had been buying cryptocurrencies and tokens based on next to no good information. https://t.co/lyxypoq0f0
— Nick Szabo (@NickSzabo4) February 6, 2018
Maybe these kinds of naive buyers have been so burned in the current bearish trend that the space’s participants will henceforth be leaner and more serious. Or maybe not. We’ll have to see.
Back to Business, Cryptocurrency Enthusiasts
Speaking of being more serious, it’s still all business for the cryptoverse’s veterans, regardless of what the cryptoeconomy is doing acutely.
Consider BitGo engineer Jameson Lopp’s fresh tweet, for example:
Services like @opentimestamps commit to the existence of gigabytes of data per day without putting all of said data onto the blockchain. Bitcoin can efficiently anchor a plethora of services such as timestampers, second layer payment networks, and even other blockchains.
— Jameson Lopp (@lopp) February 6, 2018
And some bullish sentiment has been rekindled after the U.S. Senate’s first hearing on cryptocurrencies seemed to be a flattering success.
Heads down, and keep tackling hard ladies and gentlemen.
What’s your take? Are you hodling, or have you taken some profits during the current bearish downtrend? Sound off in the comments below.
Images via CoinMarketCap, Line of Action