Article written by cryptocurrency analyst polynya, translated by Deep Tide TechFlow.
Contents:
Introduction
Main Body
This article, written by cryptocurrency analyst polynya, explores the issue of why most cryptocurrencies are overvalued. The article emphasizes that while the cryptocurrency market has experienced rapid growth, this is mainly due to their function as alternative or speculative value stores rather than actual productivity. polynya points out that a large number of cryptocurrency tokens are overvalued, with a lack of real product-market fit behind the products, leading to the inflation of the entire industry’s value and detachment from reality.
Cryptocurrencies have found a significant point of fit with most products and markets through their function as alternative or speculative value stores. This is why Bitcoin still dominates the market, even after 15 years. Ethereum has also shown currency attributes since 2020. Together, they account for over 75% of the market share (excluding stablecoins), and even higher in terms of liquidity. Tokens like XRP and ADA also have significant demand.
Over the years, there have been various judgments about cryptocurrencies, with fantasies about the imminent collapse of the global economy being common. Ironically, the global economy is actually very resilient, with continuous growth and increasing productivity year after year. This has led to a greater demand for alternative value stores like BTC or ETH. Cryptocurrencies have remained high due to the driving demand for currencies.
This has created a new economy based on BTC and ETH. The problem is that productivity in this new economy is very limited. It is expected when the majority of value comes from simple holding and speculation.
Speculation is key here. You will find that the market value of 70 cryptocurrencies exceeds $1 billion. Many tokens have existed for years, but their product-market fit can be ignored. They have undergone dozens of transformations but still failed to find any effective use. In the foreseeable future, the product-market fit potential for new tokens is apparently very limited, but they are exaggerated to billions of dollars. The ultimate result is that tokens that should have a market value of only a few million dollars may eventually reach billions of dollars one day, while hundreds of obviously worthless tokens still have market values of millions due to the huge speculative premium from the industry pillar (i.e., value storage). There is also a small problem where people mistakenly view infrastructure as a demand-driven factor rather than currency and speculation, but I have discussed this issue multiple times on my blog.
It is important to note that the cryptocurrency field does have some assets that are actually productive, but they are very few in number and are often undervalued compared to value stocks.
So, what is the solution? There is no solution; this is the nature of the industry. Speculate on high-risk speculative assets (similar to gambling), and then invest back into assets that you consider to be value stores.
Of course, all assets have a demand limit. We have seen the exponential growth of Bitcoin end in 2017, and since then, the growth rate has declined, barely keeping up with the NASDAQ. The diminishing returns of Bitcoin will continue until the market for alternative value stores and related currency attributes approaches saturation. This will lead to these severely overvalued tokens slowly declining in market value to almost zero after years of consolidation.
However, for now, the cryptocurrency market is still the craziest, most detached from reality, and uncontrollable gambling market in the world, and this gambling market may exist for longer than most people imagine.
Original Article Link:
This article is authorized for reprinting from Deep Tide TechFlow.
