We buy assets to use, earn a return, or speculate. These purposes apply to assets such as houses, stocks, bonds, and cryptocurrencies. The speculation comes to the fore in sectors where innovation is decisive.
Speculation was the primary goal in the crypto market until 2020. Because, at that time, DEFI, NFTs, and play-to-earn games were developing. In the following period, applications that create value for users on networks such as Ethereum, BSC, and Hive were implemented. However, most market players continued to view crypto as a financial instrument that makes easy money.
Bitcoin's scarcity makes it suitable for speculation. Bitcoin has features such as a store of value, transfer, and payment. On the other hand, Bitcoin is priced far beyond its use-value during bull market times. After the emergence of Proof of Stake networks, it became possible to earn returns on crypto. Thus, investors who wanted to go beyond daily trading started to buy cryptocurrencies. A group of users/investors has also formed since 2020 who bought crypto assets because they needed them.
In many cases, it is impossible to distinguish between speculation, return and use value. In addition, speculation is necessary for the healthy functioning of the market. As industries mature, speculation fades, and use value comes to the fore. And disruptive innovations give way to incremental innovations.
Lesson Learned
Road accidents in the crypto market in 2022 were caused by market players who could not manage financial risks. Terra Luna's stablecoin, UST, was a misconception, and as market conditions deteriorated, financial speculation began to work in the opposite direction. Bankrupt crypto financial institutions had invested funds that customers entrusted them with for safekeeping. Therefore, these institutions deviated from ethical paths. Crypto actors who focus on creating user value have consistently managed to get through with minor damage.
Utility Matters
Which coins have lost the most negligible value in the bear market, and do they have anything in common? We can form an opinion on this matter by examining what percentage of the leading coins have lost their all-time high (ATH) values.
I left out stable coins and coins released in 2022. Among the remaining coins, those that resist the bear market best are those with their use cases. Eleven coins have lost less than eighty percent of their ATH value in the top 100. It is possible to divide the coins into centralized exchanges, smart contract platforms, and others. Centralized exchanges and smart contract platforms serve users and generate revenue in return. Exchanges on the list are OKB, Gate Token, Kucoin, UNUS SED LEO, and BNB. We can also consider BNB as a smart contract platform. Ethereum, Cosmos, and Polygon are other platforms above the sieve. The list also includes Quant and Monero.
What About Hive?
The Hive has lost 92% of its value compared to its peak in 2021. Compared to networks with similar characteristics, Hive performed relatively well. Axie Infinity, Sandbox, and Decentraland, the top three in the play-to-earn category, fell 96%, 95%, and 95%, respectively. Arweave, Filecoin, and Helium in the Web3 category also lost more value than Hive.
Conclusion
Networks that reach overvaluations suffer huge losses during bear markets. Meanwhile, networks with high use-values, such as Ethereum, Polygon, and Hive, are also being sold beyond what they deserve.
The promises of crypto are already embodied. As time progresses, infrastructures become more user-friendly. Networks that manage to touch users' lives will come to the fore. Hive will likely be one of these networks.
Thank you for reading.
Cover Image Source: Midjourney App