Value Reconstruction

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Last week marked another defining moment in crypto's history.

It's through spectacular events like these that market maturity, regulations, smarter innovation, and tighter risk management strategies are forged – for a season.

Given time, recency bias – a cognitive bias that favors recent events over historic ones – will build another narrative that fuels the next devastating collapse of value after an incredible uptrend.

Ponzi-nomics are littered throughout the entire financial system. It's not unique to crypto. It's unique to humans and their money.

Just to put last week into historical value destruction perspective...

2008 - 2009 Housing Bubble + Great Recession witnessed around $19T in household wealth evaporated. $7T in stock wealth vanished!

2008 Lehman Brothers value destruction estimated $46B - $63B.

2008 Bernie Madoff value destruction about $64B.

2022 Terra Luna value destruction around $41B.

2022 snowball effect of Terra Luna's UST de-pegging, at least another $230B in market cap losses across all of crypto.

Catastrophic, right?

What's interesting to see is how very few point out that the market cap was already down about 43%, from its all-time in NOV '21 of $2.9T down to $1.8T prior to the crash.

The additional 20% drop of last week is hardly the "start of the bear market".

That narrative should have been called by the end of last December, at the latest, when the total market cap couldn't break above $2.3T.

We'll leave hindsight analytics and historical revisionism to the Crypto Twitter "experts".

With the market now 63% off, we're seeing a combination of whale accumulation and trend investors hoping the market settles somewhere in the 80%-95% off zone.

Think Black Friday + Cyber Monday + Everything Must Go Annual Sales all converging.

What few understand is that when the price bottoms 80%-95% off all-time highs, most of the risk has left the asset. All that's left is fear, PTSD, and opportunity.

Now the question is – can the project/coin/asset attract users and grow in utility?

In December '99 Amazon was worth about $112.
By Sept '01 it bottomed around $6.
Over 94% off!

Did you buy?

And on the way down, it wasn't uncommon to see these kinds of headlines about tech companies...

Same sector.
Same boom, bust, boom, bust cycles.
Same "It's a Ponzi" narrative.

Many tech companies did not survive. Some thrived. And new ones were built years later (Uber, Air BNB, Stripe).

What did Jeff tell shareholders during this time?

The difference?

Crypto moves much faster and harder, exacerbating the pain or pleasure, depending on the trend.

Plus, Mr. Satoshi and Vitalik B. don't provide their users with quarterly earnings reports. We have to defer to on-chain analytics and the competitive landscape to determine long-term viability.

Ultimately, crypto is a catalyst within the tech sector.

What many of us who are serious about tech are looking for are the projects that will be weighted over time.

Meaning, mission-critical and essential to the next evolution of the internet. Like electricity – if the power goes out, it's ALL over.

To paraphrase Ben G. - The short-term is a voting machine. Impulsive, emotional, biased – with utility, use, and price out of sync.

The long-term is a weighing machine. When utility, use, and price are all in sync.

The million dollar question is when?

Let's dive in.