I like to keep tabs on where speculative money is trending. In some sense, I have the personality of an old curmudgeon who is allergic to what the new generation is talking about and the promises of high risk long duration bets that may change the world.
The crypto market is one where, only by virtue of how people talk about it, I am an especially grumpy old man. Hearing things like “it’s easy to make money” or “it always crashes but ends up going higher” makes my confirmation bias go through the roof in the sense that I feel like it’s asset inflation flying at 60,000 feet and a long way down.
Here’s the total market cap of most cryptocurrencies / tokens:
Over the this weekend, bless the crypto markets’ next generation 24/7 trading hours, certain bigger name crypto such as Ethereum, Solana, Avalanche are down another 20%. It’s easy to anchor and think that with the crypto market down about 2/3 (66%) from the peak, it has to be near a bottom. But it’s still up ~5x from the start of Covid, and as a whole, the real cash generation by any protocol is still negligible relative to other assets, especially as interest rates have jumped. Furthermore I suppose cash generation to date has been largely dominated by the trading of assets versus any real consumer surplus.
Things typically bottom when people give up and move on with their lives versus keeping the faith. A whole generation of new investors in the internet bubble took years to move on. The Nasdaq bottomed out in very late 2002 after the tech bubble popped in Q1/Q2 of 2000.
Accordingly, I continue to think that “winning by not losing” is a good mantra not only now but in all market conditions, despite it feeling terrible in moments of speculative mania. Easier said than done.