How This All Ends

Louis Sykes
August 25, 2021

Crypto just once again pierced a whopping $2T market cap.

It seems now more than ever that the entire space is heating up to unseen levels.

The entire asset class has ballooned to nearly 10,000 coins and tokens, all with their own individual whitepapers, goals, and communities.

Activity on the blockchain has never been higher, smart contracts and DeFi are in full swing, and now the world is beginning to pick up what NFTs are all about.

But it wasn't always like this.

All of this activity flourishing before our very own eyes stands on the shoulders of failed projects, countless crashes, and the destruction of wealth in now dead tokens.

If this asset class has taught us anything, it's to manage your damn risk.

It doesn't matter how unique the whitepaper is or the fundamental use case of the token if the market's truly coming off.

It was hilarious to see everyone talk about the fundamentals of their altcoins when things were great earlier in the year, but tried becoming technicians on the way down.

Classic market behavior.

But don't just take our word for it - go back and look at the coins that dominated the asset class just a few short years ago.

99% of them are either zeroes, made zero progress in half a decade, or their communities have completely abandoned them to join newer and better alternatives.

We're only looking at the top five in this table, but even then, a good chunk of the earlier coins have completely vanished from existence.

BitShares has gone from the fifth-largest coin back in 2015, to the 305th largest...

PayCoin has gone from the third-largest to #2,241 in just half a decade...

And we're just looking at the top five. When we look at old coins beyond this list, the reality really kicks in.

Of the top 50 coins in 2015, 34 aren't even in the top 500, 16 of them have become so small and insignificant that they aren't able to be traded on any mainstream exchange today, and 11 don't even exist.

This has all taken place in just six short years...

And that's just the top 50!

I can't imagine how much more dire these numbers would get as we went further down the cap-scale...

Cryptocurrency has been an experiment of global proportions. It's been an asset class purely driven by human emotions of fear and greed.

It's an arena where humans are being human.

With all this decentralization and pure human instincts on display, it only makes sense that the same laws that govern the universe and our DNA are deeply embedded into this asset class.

You ever notice how a small number of musicians make up most of the album sales? Or how about that a majority of people live in a small number of places? Or for the more scientific-minded among us, how a small number of heavenly bodies consist of most of the mass of the universe?

Just like Fibonacci ratios, this Pareto distribution is everywhere, even in cryptocurrencies.

The fact that only a tiny number of crypto projects rise to the top, while 99.9% of the rest are zeroes, is merely a function of nature.

There will be heroes and there will be zeroes.

It's just that in this asset class, the probability of encountering the latter has been exponentially higher than any other market in the world.

No matter how much fundamental conviction investors have behind their altcoins, they're solely at the discretion of human emotions, not the economic utility of companies and enterprises.

So what's the takeaway from all this?

You'll often hear us discuss all these various cryptocurrencies in a very binary fashion: "we want to be long above X and take profits at Y."

We cohere to this process for a very simple reason - by simply sticking to an objective plan, we remove the emotional factor that we can all get caught up in, particularly in this space where FOMO is arguably more of an omnipresent risk compared to any other asset class in the world.

As enticing as it can sometimes be, the short history of this asset class has shown just how much of a danger it can be to treat these digital assets religiously.

Stay objective and manage your risk.

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Thanks for reading and please let us know if you have any questions!

Allstarcharts Team

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