Cryptocurrencies Fading Into Oblivion?

Cryptocurrencies Fading Into Oblivion?

Cryptocurrencies continue to make more and more Millionaires.  Unfortunately, many of these Millionaires were once BILLIONAIRES.  Even more unfortunate, is these new Millionaires are facing the very real prospect of going broke, while holding something which has absolutely NO discernable value, produces NO CASH flow, and can’t even be used to buy a bag of groceries.

A perfect example of this Rags to Riches to Rags story is Ripple (XRP), once thought to be the chief rival to Bitcoin (BTC).  For a fleeting moment, a micro nanosecond, as XRP touched $3.25, founder Chris Larsen had a net worth of nearly $20 Billion. (https://cryptovest.com/news/whales-making-ripples-who-are-the-biggest-xrp-whales/).

Easy come easy go.  With Ripple failing miserably to achieve its hype, it recently traded as low as 25 cents.  Larsen’s $20 Billion has shrunk to about $1 million.  If only the players in Cryptocurrencies had followed the adage “Take your money off the table before the Table takes the money off of you”.

Even the biggest fans of Cryptocurrencies have to be disappointed at the utter failure of these “assets” to have had even the slightest of impact on the financial system.  Weren’t they going to change the banking system as we knew it?  Instead, Cryptocurrencies are now the “Edsels” of currencies.  For those who are not familiar with the Edsel, it was an automobile concept developed by Ford that is synonymous with failure (https://www.thoughtco.com/the-edsel-a-legacy-of-failure-726013).

Ethereum was also thought to be a tough rival to Bitcoin but it too has fizzled.  Recently, its co-founder Vitalik Buterin, disclosed that the rapid growth in blockchain has come and gone (https://www.zerohedge.com/news/2018-09-08/ethereum-plummets-after-co-founder-buterin-says-days-explosive-growth-are-over).

So far, Cryptocurrencies have proven to be nothing more than a giant fiasco consisting entirely of hype.  There has been no delivery of any value except a brief period of paper wealth for a handful of speculators.  Cryptos are better known for theft, hacking losses by exchanges, and many more adverse outcomes for holders.  They have zero utility in effectuating transactions, they don’t hold or store value, and the myth that their supply would be limited, and thus emulate a type of “hard currency”, is just plain wrong.  Sure, any one Crypto may be limited, but the total number of Cryptos continues to climb.  According to Coin Market Cap (https://coinmarketcap.com/), 1900 issues are worth a combined $193 Billion while BitScreener (https://bitscreener.com/) places the number at 2400.  Not long ago, the population of Cryptocurrencies was 1600.  A few years ago, it was ONE.

A market almost NEVER produces so many competitors in such a short period of time.  If it is so easy and low cost to create a new Cryptocurrency, how can one actually be valuable?  It is estimated that in 2018 ALONE, ONE THOUSAND Cryptocurrency projects have failed (https://ethereumworldnews.com/more-than-1000-cryptocurrency-projects-have-failed-in-2018/).

Crypto crimes continue unabated with a propensity for scams, hacks, and thefts.  Some recent examples include: (https://www.ccn.com/crypto-mining-firm-ceo-exit-scams-with-35-million-in-investor-funds/), (https://www.businessinsider.com/cryptocurrencty-and-blockchain-startup-prodeum-pulled-an-exit-scam-2018-1) and (https://www.cnbc.com/2017/11/21/confido-ico-exit-scam-founders-run-away-with-375k.html).

The other fatal flaws which were identified in our December 21, 2017 piece called “Bitcoin or Bustcoin” (http://markonomics101.com/2017/12/21/bitcoin-or-bustcoin/) have yet to be fixed or mitigated.  Bitcoin’s price and it’s future usefulness are at diametrical odds.  To its credit, somehow it has managed to still command a sizable market capitalization in excess of $100 Billion and now represents about 55% of the entire Sector’s market capitalization.

The total Market Capitalization of Cryptocurrencies according to Coin Market Cap (https://coinmarketcap.com/charts/) is now down nearly 80% since January 7th, 2018, a period of 8 months.  If Bitcoin is excluded, the loss is a staggering 85%, from a high of $550 Billion to $85 Billion.  This was inevitable for reasons summarized in this recent piece (https://markonomics101.com/2018/08/11/tipping-point-part-1-cryptocurrencies-continue-2018-collapse/).

Despite the massacre in Cryptocurrency prices, Bitcoin still has a core of fans such as Thomas Lee, a founding partner at Fundstrat Global Advisers.  Lee had price projections for BTC of $64,000 per coin as recently as May 18, 2018 and still predicts $25,000 by year end of 2018.  Several other Bitcoin players have forecast prices as high as $1 Million per coin, including the almost infamous Winkelvoss twins who recently had their petition for a BTC Exchange Traded Fund rejected by the SEC.  Other notable fans include Max Keiser (https://coinsutra.com/bitcoin-price-predictions/).

Apparently, none of these Bitcoin dreamers have seen these BEARISH charts, which should make any player in Cryptocurrencies shudder.

It is always important to keep in mind that market rallies will occur from time to time, giving some fleeting hope to the remaining Cryptocurrency proponents as well as “bottom fishers”.  In fact, a recent piece called “Are Cryptocurrencies Finally Bottoming?” (https://markonomics101.com/2018/09/04/are-cryptocurrencies-finally-bottoming/) examined whether a decent tradable bounce was in the offing.  Even the most devastating Bear market declines in history were interrupted by ferocious rallies.  The post 2000 Bubble in the Nasdaq (wiping out 85%) was interrupted by a 50% gain.  The largest BULL MARKET in stock history occurred off the post-1929 Crash.  Cryptocurrencies experienced a near 100% gain in mid-2018 in the midst of losing nearly 80%.

There is no point in even trying to estimate a bottom for this BEAR Market.  Any investor with sizable holdings should ask whether they can withstand the transition from Billionaire to Millionaire to Zero-aire..  If they can’t, this is the wrong sandbox to play in.

 

 

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