Thursday , October 21 2021

Why Bitcoin, Ethereum and all cryptographic markets lost value


The opinions expressed herein are those of the author and do not necessarily represent the views of

In my view, investors in 2017 – and specifically in the fourth quarter – wanted to buy Bitcoin (BTC) and Ethereum (ETH) for the sole purpose of exchanging it for specific ICO tokens in which they would like to invest. Buyers of Bitcoin and Ethereum did not want to own Bitcoin or Ethereum. They wanted to buy the new tokens from the initial coin offer (ICO), but they needed to buy Bitcoin and Ethereum as a short way to get what they wanted in the end. The owners of Bitcoin and Ethereum did not want to sell. They were watching the price of the increase of their property, so why would they? They also believed in Bitcoin and Ethereum. Then, in a world of "supply and demand," the price rose.

So the companies that had completed their ICOs became whales, which began – as a group – to lower their tokens in December and January, thereby transforming the dynamics of the huge demand for Bitcoin and Ethereum for all Bitcoin and Ethereum sellers. After the New Year's hangover subsided, startups had to change their encryption to pay in order to pay engineers and build their startups.

So it was a panic run in the bank. The pressure from US regulators in the third and fourth quarters of 2017 led to a downturn and almost total closure of the ICO at the beginning of 2018. Thereafter the ICOs stopped or slowed dramatically. New token issuers began to accept fiduciary money without having to go through Ethereum, which killed more demand and left only sellers and forks and no buyers. In a world of "bid-ask," the market has sunk. An interesting dynamics of the current market is that the prices of all crypto-coins are highly correlated with each other. Just look at the price of any token in CoinMarketCap, and you will notice a perfect correlation between the prices of most of them. Bitcoin and Ethereum go up and down together, and most other tokens are correlated in the same way. It should not be like this, but without any bank analyzing and reporting these startups – as they do for Apple, Amazon, Microsoft, etc. – That's how it is for now. Therefore, Bitcoin can increase or decrease the price of your token, but now it seems that gravitational pull works in both directions.

In 2018, something else developed: it became clear that all of these funded ICOs were not filled by angels or VCs with real-world technology expertise – most were not chips that you really wanted to invest in. Previously, all these currencies were related to the price increase of Bitcoin and Ethereum, but now they are being dragged down. They are all correlated, and much of the global market capitalization is sinking the cryptobucket in general.

Why Bitcoin, Ethereum and all cryptographic markets lost value

What will happen is that all these weak companies will finally be eliminated and we will have some decent and even surprising companies. Today, retail investors in Southeast Asia and around the world are no longer gambling and playing money at the latest ICO to attend some blockchain event, or at least not in the fourth quarter volumes. 2017. They used to be 20% of institutional investors (VC) and 80% of retailers. Now, they are 80% of institutional investors, if not more. It makes sense to me that if VCs highly rated as a16z, Pantera Capital and 7BC.VC invest in a start-up of their large investment funnel after performing VC degree due diligence, retail investors will want to invest – following the VC leadership in jurisdictions where this is in compliance with the local securities law (or, in the US, if the start-up has submitted a S1, Reg A +, etc.).

The time has come for experienced VCs to raise real venture capital funds, generate large volumes of operations flow, processes operations flow with fully centralized and decentralized teams, qualified to perform due diligence, finance the best, in addition to to help these portfolio companies execute and manage investor risk through diversification and portfolio building. We have seen a return to healthy capital financing and not just tokens. Investors now have equity and chips. Some decentralized cases of "pure play" require only chips, but also with due diligence from the old school, before throwing away the money. We are also seeing a return to market assessments rather than a team that dropped out of school seeking a $ 50 million or $ 100 million prior assessment without ever finding a payroll or getting any substance before getting that assessment . type of evaluation.

The new companies to be financed in 2019 – to be listed in 2019, 2020 and 2021 – will on average be much better than those of the 2017 cohort, which will result in a market recovery. Experienced VC-backed entrepreneurs are now working on building block chains, which means that the management team population has evolved beyond the original Bitcoin anarchists.

Bitcoin itself is robust, proven by its survival in multiple events of Mt. Gox and numerous cycles of ups and downs. Bitcoin's long-term curve is up and to the right. Once the infamous coins run out of money and disappear, the market will become much more robust. Many of the managers were delirious because of their experience of traveling the world and concluding their OCIs, thinking that the BTC and the ETH would only go up and up if they did not exchange enough of their encryption by decree. Not only did they have an initial risk, but they also insanely added currency risk (FX, for its acronym in English).

So the good news is that these weak companies, which should never have been funded, will run out of cash earlier than expected, because their encryption is worthless when they become fiat than they thought back then. who completed their funding. The expulsion of these currencies, which currently weakens the market, will cause it to rise. Today, startups exchange their encryption by decree the moment they receive it.

Why Bitcoin, Ethereum and all cryptographic markets lost value

I also predict that we will see some killer startups take off and we are going to generate massive adoptions that will lead leading users to the world of cryptography and – in a gravitationally correlated world – this will raise the tide of the entire market. We'll probably see how some video games become a big sensation – like Angry Birds – or something that will boost the adoption of a token. I hope to see something more than anyone thought, like Skype – that everyone starts using, which will drag large populations into encryption, since the value will simply be there.

It is imperative that all companies move towards the block chain so that neither party can change the number of how many widgets have been sold or with whom to pay what. All business, government and health data should be in the block chain, and very soon it will be unacceptable that without them they will reach a trade agreement and trust that the other party will tell you how many widgets they have sold in China, the United States or Africa. Once these business transactions or elections are in the chain of blocks and no one can manipulate the data, all parties can trust each other. The big picture here is that the market will see a big rebound and a long-term trend up and right.

2019 can be a great time to invest in a venture capital fund focused on a chain of blocks or to invest in building block chains, drawing lessons from high-performing VCs that have an investment team with business experience and experience in achieving a high performance IRR performance in the quarter of an hour and cash cash income.

Andrew Romans is a venture capitalist based in Silicon Valley at 7BC.VC and Rubicon Venture Capital, as well as author of two of the top 10 Venture Capital books on Amazon and Masters of Blockchain.

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