Perma Bears, Crypto Adaptation, and Exponential Change

I have thought about three topics to cover in today's post. It was hard to decide which one to write about. In the end, I decided to write briefly about all three.

Perma Bears Turned Out To Be Wrong (For Now)

Since the start of the year, the total value of the crypto market has increased by 42%. Hive's market value rose 67% during this period. According to the perma bears' arguments, those who expected lower purchase prices were deprived of the premium formed in the year's first two months.

Perm bears' arguments for why prices should drop often change. They claimed this situation would not last long when the Dow Jones rose above its 200-day simple average in November. They suggested that when the S&P 500 broke above the 200-day SMA on January 23, the main thing to look for was the Nasdaq 100. They cited low trading volume on January 31 when the Nasdaq 100 also broke above the 200-day SMA.

Meanwhile, the price of Bitcoin, Ethereum, and many other cryptocurrencies has also risen above the 200-day average. The expected recession in the world's leading economies has yet to be realized. In the USA, data such as the PMI index and labor statistics show that a soft landing is possible. The expected energy crisis in Europe did not occur, and natural gas prices fell to the level of 2021.

After the rapid rise in the crypto market in January, a quick pullback in prices seemed reasonable. Prices have dropped a bit. With the increase experienced in the following days, the prices rose above the level at the end of January.

Perma bears' last hope is for Bitcoin to stay below its 200-week averages. In Bitcoin, the weekly EMA is 25k USD, and the weekly SMA is 25.1k. When writing this article, the Bitcoin price is just below these levels. I agree with the ideas of perm bears about not taking excessive risks and being cautious. On the other hand, it is necessary to take advantage of the price increases that have taken place before our eyes.

Crypto Adaptation

Recently, I watched an interview with successful basketball coach Ergin Ataman. Ergin Ataman, who made Anadolu Efes Euroleague champions in the past two seasons, has a unique personality. In his answer to the interviewer who asked the secret of his success, a sentence caught my attention: "If I have to do something, I do not delay it; I do it immediately."

This principle can shed light on evaluating crypto projects. Today's effective blockchains emerged in 2017 and earlier. At the maturity level of the crypto market, crypto networks must have reached a specific user adaptation. The level of user adaptation achieved also reflects the technical and marketing skills of the people who contribute to blockchains.

When we examine the price movements of the top 20 coins by market value since the beginning of the year, we see the effect of the adaptation on the price. In the top 20, Polygon, Avalanche, and Solana are the coins that have gained the most value. They have in common that they already serve a large user base. The fact that the Hive price has increased above the market average must also be related to its large user base.

User adaptation can increase artificially under the influence of excessive incentives. For example, the number of bloggers on Steem approached one million in the first half of 2018. Because the Steem price was above 3 dollars, money was distributed to bloggers. However, we are now in bear season, so financial incentives are minimal. In such an environment, we need to appreciate the value of networks that still serve hundreds of thousands of users.

Exponential Change

I criticized perm bears above. Someone might call me a perma bull and find my excitement about crypto excessive. Because, except for the periods when the pricing reaches extreme levels, I always recommend buying. My excitement about crypto is about the exponential development of technology. Perma bears always ask for more discounts on purchases, probably due to their linear thinking habits.

Of course, the exponential development of technology does not mean that the price of all cryptocurrencies will increase exponentially. The value of networks providing user adoption with reasonable incentives will increase exponentially.

The landscape will become clearer if we experience another bull season in the crypto market. I wonder if perma bearers are right or perma bulls? Or do they both represent extremes? We'll see which side is right in a few years.

Thank you for reading.

Cover Image Source: Midjourney App

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