No, Crypto Doesn't Need Further Losses Before a Recovery

Here I'd like to put forth a theory that goes counter to what I've been repeatedly hearing in the crypto community lately. It would seem that the conventional wisdom these days is that we need to have a further correction until there is a "no hope" scenario in crypto in order for a true recovery and new bull market to erase this bear. That's simply not true.

Image Source

Now, it is in fact the best time to buy an asset is when nobody else wants it. When the whole market is so depressed that they wouldn't touch it with a figurative 10-foot pole. This sort of thing is proven out with scenarios like Bitcoin the last time it crashed or when the oil market bottomed in 2015. Oil fields here in the U.S. came up for sale for pennies on the dollar as the price plummeted. I remember trying to convince my wife to buy an oil field instead of our current house and she looked at me like I was crazy. So did everyone else, because all hope was lost in the oil industry during that time. The whole industry had been overbought and overleveraged at that point and it was a bloodbath. It was widely known that a sub-$60 price would tank many American firms, and the price continued to sail down past that number and stay there. Who could blame them for having that perspective? In spite of that situation, it would have been a much better investment than a house in retrospect, yielding several multiples of the original seed money. This would be true even if the oil field in question was mothballed and simply resold later. The productive potential of those assets made them much more valuable as the price rebounded.

That said, those aren't the only scenarios in investing that will yield profits. While past performance is not necessarily an indicator of future gains, conversely, past bloodbaths are not necessarily an indicator of future ones either. One of the reasons the oil industry was so overbought in 2014 was because people anticipated a return to the inflated prices that occurred just before the financial disaster of '08-10. This is the same kind of mistake that I think investors are making in regards to the crypto markets currently, but in the opposite direction. They seem to universally think that we need all hope to be lost within the community before another big pump can happen, just like the last time.

Making the assumption that the crypto markets are in the middle of a crash exactly like the last one is more than likely a mistake. As the saying goes, history doesn't repeat itself, but it rhymes. What this means is that the market in crypto we are dealing with is a completely different market than what formerly amounted to only Bitcoin in the last correction. We have many more coins with different and varying value propositions. We have many more investors with different and varying interests in the space. As such, the coins themselves are not going to act like Bitcoin did in the last correction, and the investors themselves are going to have differing behavior patterns than the last time. Not only that, but it's likely that the next pump won't come from people who already have investments in crypto, but rather from newcomers who have not prior knowledge of crypto's past, so sentiment within the crypto community currently would end up being irrelevant.

One thing is consistently true about the timing of markets. Experts are constantly being fooled by them. The reason this occurs is that people tend to listen to experts that were right in the past, which in turn influences the behavior of the markets in the future, which in turn ensures that the predictions they're making won't actually come to fruition at the times they predict. In my experience, the talking heads in any particular market space are almost universally wrong about the times when markets change from bear to bull and bull to bear. My opinion based on what the experts are saying within crypto are saying, is that we're in for a pump in short order. All hope is not lost, but market sentiment is bearish amongst experts pretty much across the board. This is the time it will turn.

Disclaimer - This is not investment advice. I'm just some guy on the internet having fun thinking out loud about the future of markets. It's a hobby of mine and everything I say should be taken with a grain of salt. Hire a professional investment advisor for financial advice, or simply do your own thinking. I am not responsible for your decisions, whether they be good or bad. I welcome differences of opinion if discussed civilly, so please feel welcome to do so in the comments below