Crypto Market Meltdown - An Optimist's Perspective

The crypto markets have been absolutely ravaged in the last few days, with all major coins posting big daily losses.

You probably feel a bit like Leonardo di Caprio after some rough loving from a grizzly!

A perfect storm of bad news, FUD and panic selling have popped the bubble that had been building over the last couple of months, and now prices are falling like a lead balloon.

I like visual metaphors, and this about sums up the current scene:

I expect most of those with skin in the game have a similar view on their crypto portfolio, with any gains since the big-run up at the end of November being obliterated:

If you were seriously lucky and impulsive, you would have got out at the peak around the end of December. If you were smart, you would have got out in the next couple of weeks. If you were brave (or should that be stupid?) you would still be holding, and looking at the prices we are seeing right now as an opportunity. When there is blood on the streets...

Lets take a step back for a second, and a deep, calming breath.

Its clear that the sudden downturn in price is not the end of the world for those who believe in a not-to-distant future where cryptocurrency plays a major role. The crypto scene is still in the early stages, but the tech is now advancing quite quickly. This year should see some major improvements for the big players. For example:

• Bitcoin - Lightening Network finally being tested and implemented, increasing Segwit adoption, increased privacy with Tumblebit + Zerolink, more sidechains, Schnorr signatures (more details here)

• Ethereum - Raiden Network + other scaling solutions, switch to PoS, more and more dApps, more ICOs using Etheruem as a protocol layer (more details here)

• Monero - Kovri (hides IP), Multisig support, hardware wallet integration, bulletproofs = smaller + faster transactions, go-to currency for the darknet (more details here)

• Iota - removal of coordinator, 'Q', Tangle growth, wallet upgrades, more partnerships with industry titans, more use cases as IoT revolution takes off (more detials here)

• Steem - SMTs, increasing adoption of Steemit

This is just a sample of coins - look at any serious project's roadmap and community talk to see what the future holds for them.

What's keeping the market down?

There have been a few key issues that have tanked the market. These include:

• Confusion regarding regulation. Recently we have seen key markets like South Korea, India & US talking about introducing stricter regulations. Its still not entirely clear what this involves, but once actual guidelines are put in place, the situation will better, and serious investors will be less cagey and prone to jump ship

• Chinese bans. I don't know what is happening here, in truth. It looks like China is doing its best to control crypto within its borders, and having a hard time doing so! The fact that Hong Kong allows trading relatively freely and that the country contains some very large miners is making the situation quite confusing. Whatever happens from the recent bans and regulation, its only one market, so long term even if they really restrict access to crypto I dont think it will have a massive effect, as there are enough people who are keen on crypto outside of the world's most populous country

• FUD from mainstream media and bankers + govts. A lot of the nonsense spouted by these entities is quite laughable, they misunderstand crypto and decentralization, and are actually threatened by it. Their opinions still hold a fair amount of weight but I expect this to decline over time. Read widely, don't get your info from one source, and think critically from a technical perspective.

• Stock market slump. The crypto market isn't the only one on a slide at the moment. A bubble in stocks has also emerged, and people are getting nervous. Assets are taking the hit. I don't forecast a downturn like 2008, but the global economic system is still quite unhealthy, running on massive amounts of debt, and the monetary stimulus policies are wearing thin. Watch this space...

What next?

There is now a lot of money sitting on the sidelines, waiting to pour back in once confidence picks up on some good news. This could come quickly, once regulatory issues are cleared up, or it could take a bit longer if nerves take over and we enter an extended bear market.

As mentioned above, the fundamentals of a lot of coins are strong, and the developers are not sitting at home twiddling their thumbs, but rather working hard and every month the tech gets stronger. When we compare developments in the cryptosphere with developments in fiat, stuff gets interesting!

The underlying concept of Money as we know has stayed the same, fulfilling the basic function of exchange of value. It doesn't do a particularly good job however, as physical cash and the wider banking system are being exposed as inefficient in this borderless age of fast internet, smartphones, IoT, and decentralization. Crypto is poised to uproot the old system, putting you in control of your funds, making transfer of value instant, and, depending on what you want - private (anon coins) or transparent (open ledger). Throw in smart contracts, where money becomes programmable, and the possibilities are mind-blowing.

It seems we are entering a brave new world where technology and the economy are intertwined. Bet against this at your peril!

I for one will be patient, giving the market time, using this dip to buy a little bit, trusting in the tech and development teams. My hands are strong.

Importantly, I played by the golden rule with earlier investments - dont put in more than you can afford to lose.

We'll see where we are in a few weeks or months, its gonna be quite a ride, but i'm quietly confident this is not the end, only the beginning...

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What are your plans - have you sold it all, are you holding, or maybe buying?