Hey everyone, we’re now speeding along, having survived Tax Day and enjoying a much-welcomed mini-bull run on crypto. I hope you are ready for Q2 and beyond!
We’re seeing some amazing price action in the wake of Tax Day, but it’s vital to remember crypto’s price action historically has followed an extraordinary pattern of extreme boom-and-bust cycles. For many on both sides, it’s an opportunity to gloat in the insane profit-taking or conversely, the bloodbath in a crippling bear market.
What both sides often fail to see is these periods of good times and bad times represent extreme change: namely, the booms are capital injections and technological innovations, which promotes adoption, accelerates learning, and increases the pace at which digital economies are made more viable. The busts are periods of consolidation, accumulation, reflection, and a return mean values and a doubling down on the original technological visions that made cryptocurrency so attractive to begin with. Busts can be great for innovation and slowing down the inherent greed factor, which contributes to over-estimation of a technology’s promises in the short term. Booms, on the other hands, are obviously good times for all monetarily, but they also give the entire enterprise increased cachet in a world that is already deeply skeptical of anything not driven by hierarchical power structures.
Decentralized and mostly-unregulated industries have always been viewed skeptically by the world, which is invested in the traditional systems of class and order, maintaining the division between the haves and have-nots. But while crypto is not immune to power variance, on the whole it’s distributed more widely among those who would not have any access at all in traditional markets (accredited investors only may apply). When cryptocurrency increases its total market share, this validates it more. And when it recovers from a bust period, that validation gains even more traction.
Cryptocurrencies, as a whole, represent not just a single crypto-economy but many crypto-economies. Each coin has its own utility and use, and so a coin that survives a boom-bust cycle represents solidity, stability, network strength, and likely that is due to a combination of factors like its community support, its internal governance and monetary models and policies, and what the currency can actually be used for—whether its used to back a service, or if it’s used to purchase goods, or if it has an entirely different utility, such as voting or consensus.
Over time, crypto-economies which survive these boom-bust cycles gain strength and resilience against the next cycle. They become, in the words of Nassim Taleb, “anti-fragile.” This doesn’t mean that all cryptocurrencies that survive are inherently useful or possess quality. Evolution takes time, and even in the fast-paced world of crypto, shitcoins can still survive while greed and idiocy are prevalent (and they are). But eventually, the strong weeds out the weak.
This built-in resilience means that crypto markets over time will thrive. And because they can innovate at a rapid pace, they will be especially resilient compared to so-called offline or analog economies, which themselves are not anti-fragile and prone to much more manipulation and shadowy forces.
While we still have a long ways to go, the Q1 downward correction and this new upturn at the beginning of Q2 is a good reminder of why in the long run, cryptoeconomy’s outlook is ultimately bullish.