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All the King's Stables

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@tarazkp
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This morning I was looking at the markets and my portfolio bleeding gratuitous amounts of value and was think about how things have changed since the last bullrun in 2017. While a lot of people see still referring to those times, the game has changed a lot since then.

One of the biggest changes has been the widespread introduction and growth of stable coins, with several taking their place by market capitalization in the top 100, like USDT, USDC, BUSD and DAI. These coins don't offer much in way of return, but they have a massive amount of utility as tokens that are able to retain a stable value in the blood baths. Previously, traders would move into other cryptos or into fiat directly, but with cryptos being led by BTC and fiat causing other headaches, the stables offer the best of both worlds.

Now, I don't know how the dynamics are going to change, but a lot of people are looking at the dominance of Bitcoin in the market as an indicator as to how the alts are performing. This was a pretty decent indicator in 2017 when people were moving from the high of BTC into the alts, but is it the same now? What I think is happening is that in the dips when traders are moving out, the dominance is obviously going to drop, but it isn't actually running into alts, it is running into stables and when they are ready, they will get back into BTC from that point.

This will likely fundamentally alter the dynamics of the market regarding alts this bullrun, as there won't be the same drive to get out and try and "pick a winner" that won't lose as much percentage-wise as BTC. This could also mean that there will be more alts left out of the market pumps than there were in 2017, also because there are so many more now.

What I hope will happen, is that traders will realize that for the sustainability and growth of the crypto industry as an industry that can alter the way the entire economy functions, what needs to happen is rather than moving into projects for immediate gains or protection, real projects need to be supported. I do not know if there is the maturity among the market yet that allows for the investment into building businesses, but long-term, that is what is needed.

Whilst the dotcom bubble was considered a bubble since it had a higher monetary value than practical value, it wasn't a bubble once you start to look long on what has been generated from it, with many of the most valuable companies in the world either born during, after or heavily supported by what came out of it. The loss in the "bubble" crash, has well and truly been outstripped by the wealth that the dotcom industry has generated since.

A lot of people have compared Bitcoin to Tulip Mania, but have failed to consider the differences. The tulip bulb bubble in the Netherlands lasted between 1636 – 1637, but it isn't the time that is the difference, it is the potential of the market. There was essentially no room for the tulip bulb market to evolve, to innovate, to add value to warrant the bubble in the first place.

Perhaps once upon a time, this could have been said about Bitcoin, before the first pizzas were bought, but since then, usecases are getting added to the point that some people are concerned that it could become a global reserve currency. Not only that, it can be used in various ways to earn upon, like in DeFi liquidity pools and could in the future be used to stabilize the stables themselves and back cooperative business models.

Pegging stables to the US dollar is only for the sake of convenience as it is so widely used, but stables could effectively be pegged to anything, as long as it is considered stable enough to bring the utility it requires for various forms of trade, something participants can rely on. Can the US dollar be relied on globally when the US government and financial institutions keep printing it to solve internal monetary issues?

While the values are going to be volatile for some time to come, innovations in crypto are going to evolve rapidly and impact on many forms of traditional business, capturing increasing amounts of wealth and becoming far more valuable than the current market capitalization, a tiny two trillion dollars worth. The growth potential is absolutely enormous, which is why so many financial institutions are investigating and building for it, as they know that just like the dotcom bubble;

This isn't a bubble.

The market values are going to swing up and down in the same way that any industry or business is going to have ups and downs in the formation stages, until there are enough use cases and participants (supply and demand) to reach a moving equilibrium. At that point, it then comes down to project competition and innovation in order to capture market attention to generate wealth. The investment opportunities that the industry is going to offer to create the new economy are numerous, and the wealth that the maturing industry is going to generate is going to dwarf the early days.

Looking at the biggest example of one "project" from that dotcom bubble, we can see the potential of investing well.

And one of the beneficiaries of the dotcom bubble:

What was the cost of the dotcom bubble?

What people also have to remember is that this value didn't just disappear, it was transferred. Some people become insanely wealthy because of that period in time. However, how much are the companies that were born out of it worth and how much do they generate?

At least for the worth, here is the top 10 in the Nasdaq.

The top 3 alone are worth more than the "loss" of the bursting of the bubble.

As they say, when in doubt, zoom out and this is the case for all bubbles too. It is important to acknowledge whether a bubble is a bubble because there is no value, or it is a bubble because the value hasn't poured in to fill the gap yet. While there was nowhere for the tulip bulb bubble to evolve to fill the gaps, there was and still is plenty of room for tech innovation to grow and generate wealth, and I suspect that the next shift that will supercharge the continued evolution is tying that tech innovation into decentralized economies, where not only are the businesses competing on products and services, but also on the economic benefits they can offer their users. But, this steps outside of the tech industry too and attaches itself to all manner of business activity, trade and consumption.

The blockchain and crypto industry is evolving rapidly and comparing the current situation to the past might be becoming increasingly irrelevant - but likely, not as irrelevant as the current situation is going to look in comparison to the future in the industry, a decade or two from now.

The stables are going to have a huge impact on the markets, but what is actually going to stabilize Bitcoin long-term, are the businesses that are built on other blockchains that create a complex matrix of usecases that all add economic weight to the digital economy.

It is easy to get caught up in the daily hype, but it is good to remember that there is a long game in play and it is along that road where the majority of the value will be created. People talk about the risks of investing into crypto, but there is actually very little risk involved - the risk is in which are going to survive and which will thrive and help all the ones to come, have a future.

One of the opportunities of crypto is, that as owners, we have some say in the outcomes.

Taraz [ Gen1: Hive ]

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