The crypto universe started the new week under siege after a weak-willed rebound fizzled out.
Bitcoin moved below the lows hit Saturday, when “digital gold” extended losses to 50% from record highs reached just a few months ago.
Crypto’s link to traditional assets, and particularly US tech, is a liability right now. The positive correlation (figure below) was a blessing in 2020. Now, it’s a curse.
On the bright side, tech shares can be valued on the fundamentals, something that isn’t generally possible with crypto. If big-tech earnings don’t disappoint, a rebound in the Nasdaq could pull Bitcoin (and its progeny) along for the ride.
Of course, the opposite is true as well. Last week’s crypto selloff was exacerbated by Netflix’s dismal guidance, given the impact on already shaky US tech shares.
Note that Solana and Avalanche have absolutely crumbled (figure below). The former is down 68%, the latter 58%.
If you know the space, that’s a big deal. Solana had trouble during the selloff last week, while Avalanche appeared to perform well. (Here “perform” refers to network stability.)
In an interview with CNBC Monday, Lloyd Blankfein essentially summarized my own view on the cryptosphere — it’s too mature to collapse entirely, although “mature” is something of a misnomer depending on how and where in crypto you’re applying it.
“It’s lost a lot of value, but [it’s] at a point where it’s trillions of dollars… and [a] whole ecosystem [is] growing around it,” he said, adding that although he “may be skeptical,” he’s “also pragmatic.”
“And so guess what?”, Blankfein asked, setting up the kicker. “I would certainly want to have an oar in that water.”
Regular readers know I now have “an oar in that water.” Having spent the last two weeks immersed in the DeFi world, I can say, definitively, that it’s not going to disappear overnight.
But it’s not for the faint of heart either. Imagine a combination of Las Vegas, Deadwood and Alice In Wonderland. Wandering around in there, you can get rich (literally), go broke (literally), get drunk (figuratively), get shot (figuratively) and meet talking animals (literally).
It’s worth noting that after a 50% one-week increase in TVL, Fantom is now the third-biggest DeFi protocol.
And yes, I own some FTM. “We’re all a little mad here.” Including, apparently, Lloyd Blankfein.
Getting interesting QQQ down >4% ,,, a trading pause at 7% is not beyond the realms of possibility
There is no doubt that Defi will continue however, I expect that when the next “big one” happens all assets will deflate and most Cryptos will become worthless. The survivors will then go on to become a real assets class. Essentially following the arch of the economic Darwinism we saw after original internet boom of the 90’s.