Back in early 2020, Bitcoin had plummeted to ~$5000, and Solana was worth less than a dollar. Coins like MATIC costed about a penny, and the AXS token was valued at only $0.50.
Three years had passed since the epic bull-run of 2017, and almost all hope for the industry had faded. However, those who stuck it through and did their research were handsomely rewarded.
A year later, a wave of liquidity flooded the market, and the prices of these cryptocurrencies started to pop like popcorn, reaching insane valuations.
The Next Wave
As the M2 money supply continues to grow, researchers are expecting another wave of liquidity to flood the markets soon. That said, even despite of all the bullish news coming out of the United States, crypto valuations continue to stumble.
Although it's tough to survive these bear markets, they offer us an opportunity to dig deep into projects, and take an educated guess as to which ones are overvalued, and which are undervalued.
Overvalued Projects
Over the years, a lot of wealthy investors have been investing in popular cryptocurrencies like Bitcoin, Ethereum, and others. Not because they "love the tech", but simply because they wanted to diversify their portfolios and have exposure to greater gains.
Very few of these investors understand the technology behind Bitcoin or Ethereum, and even fewer have spent time researching the more obscure projects that have been innovating atop the foundations of Bitcoin and Ethereum.
There are governance tokens on Ethereum, for example, that merely give stakeholders the ability to vote on proposals, and they are valued in the billions of dollars. These protocols are open source, and can easily be improved upon and replicated on other chains.
Despite the market downturn, a lot of these projects still have relatively high valuations. Consider too that the teams behind these projects don't have much motivation to innovate and take risks, because they're already sitting comfortably on mountains of cash.
The capital invested by uneducated investors hasn't caught up to the innovation yet, but eventually the wealth will have to transfer from the speculative projects to the ones that have been optimized for things like affordability, privacy, ease-of-use, and censorship-resistance.
Undervalued Projects
The best time to be discovering the projects that have this kind of potential (and diversifying your portfolio accordingly) is when the market has crashed, and most people have stopped paying attention to it.
You will have more time to calmly observe which projects continue to grind, despite the pitiful valuations. You will also see which projects are loaded with money from previous bull runs, and therefore have less motivation to hustle and take risks.
Instead of drowning in despair during these bear markets, you could think of them as an opportunity.
Until next time...
Market crashes ultimately give you more time to research and determine which projects are viable in the long-run, and which are likely to shine in the next bull-run.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the Hive blockchain. You can also follow me on InLeo for more frequent updates.
Further Reading
- Bitcoin Surpasses Its All-Time High Of $69k And Repeats The Pattern Yet Again
- How To Spot The Difference Between Good and Bad Crypto Projects