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Back to Basics: Crypto Fundamentals

Back to Basics: Crypto Fundamentals


If you bought bitcoin one year ago, you’re probably looking at a 200-300% gain. Any time before that, well – just try to find another asset class that can meet that kind of ROI.

But if you bought at any point in the last eight months, you’re sitting on a loss – maybe a heavy one. Bear markets are always miserable, and its a part of the whole psychological picture of a downtrend that it’s hard to retain perspective. That’s what leads so many traders to dump their holdings at a loss.

So at times like this, it’s always worth taking a step back and reminding yourself of the big picture. Cycles are a normal part of every market, and bitcoin’s history is one of successive bubbles. Sentiment and price do not match the reality of where the technology and adoption are at – in other words, spot price and long-term value are almost always out of sync. That’s why the contrarians who can distinguish sentiment from value do so well.

If you need to be reminded about some of the fundamentals driving the crypto economy, here are just a few:

MtGox has moved from bankruptcy proceedings to civil rehabilitation, meaning that customers can claim their share of the coins recovered from the defunct exchange. Gox’s trustee selling BTC has been blamed for the price declines since the beginning of the year. This development takes a billion dollars of supply off the market and will see many old holders credited with coins they thought they’d never see again.

The SEC has stated that it doesn’t view BTC and ETH as securities – meaning they will be regulated more lightly, and traders don’t have to worry about the bureaucracy and compliance hoops they would have had to jump through.

SegWit is live. Fees are lower than they have been in years, and delays are minimal. Exchanges have implemented transaction batching. All of this gives the bitcoin network higher capacity than ever before.

Lightning Network is being used – offering fast, super-low-cost bitcoin transactions and massive scaling potential.

There has been a surge of institutional interest in bitcoin, as well as other cryptocurrencies and blockchain technology more broadly.

Facebook has started to allow crypto ads once more, and there is a persistent rumour they want to acquire Coinbase.

All of which points to a bright future, even if the present is a dark place.


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