VC Explains Why Crypto Has Taken A Dive This Year

Ask any crypto trader what’s happening with their investment these days and you will get a typical response “Why is the Cryptocurrency market cap falling?”, “I put all my savings in cryptos, what do I do?”, “When moon?”, “When will the market rebound?” etc.

Venture Capitalist Chris Burniske took to Twitter to explain the most commonly asked question in the cryptocurrency space:

“Why the cryptocurrency markets falling in 2018 and when they will be rebound?”.

Chris is a partner at the Venture capital firm Placeholder which has raised over $100 Million to invest in Crypto assets and he is also the author of the book Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond.

According to Chris Burniske, Cryptocurrency markets fell in 2018 due to the rate of adoption ( apart from trading/investing ) being much slower than the rate of price increase. According to Chris, the markets were up 30x but adoption wasn’t.

He says that most explanations that are given justifying the frequent fluctuations in the market are just reasons for traders driving the bear market.

The 2017 bull run was far ahead of actual utility, Chris says:

The macro story I tell myself is “financial reality” divorced from utility fundamentals in 2017, and so we have to (expectedly) course correct.

With so many ICO’s raising Millions and even Billions of Dollars with just a whitepaper makes it obvious that the hype is far ahead of actual use cases and adoption. The underlying protocols like Bitcoin and Ethereum are yet to be scalable so there is no question of mass adoption in the near future.

Chris in his medium article explains the Crypto J-Curve which is basically a rough market cycle that a project goes through in the long term.

Note that DEUV stands for “discounted expected utility value” and CUV stands for “current utility value”. The enthusiasm for a Crypto project at the initial stages is high hence higher DEUV and lower CUV due to the non-existent protocol.

There is a drop from the speculative bubble after some time and the market consolidates which is pretty much the markets right now, but eventually as the development happens the value increases.

With increased use, the CUV of the cryptoasset grows quietly.

Chris Tweeted:

1/ Why is #crypto falling so much in 2018? Because in 2017 the market was up > 30x, but adoption (beyond investing & trading) wasn’t concurrently up 30x.

— Chris Burniske (@cburniske) August 12, 2018

So to summarise there is no particular reason why the markets are crashing other than it is a part of the market cycle where the increase in 2017 went way past ahead fundamental value and had to crash at a point. But on the brighter side as the development happens, when actual adoption begins the market will eventually pick up.

Image Source: Tokensummit

Link to the medium article: https://medium.com/@cburniske/the-crypto-j-curve-be5fdddafa26

Link to the book: https://www.amazon.com/Cryptoassets-Innovative-Investors-Bitcoin-Beyond/dp/1260026671

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