Across the Valley
Comment of the Day

April 25 2018

Commentary by Eoin Treacy

Across the Valley

Thanks to a subscriber for this report from Pantera Capital focusing on cryptocurrencies which may be of interest. Here is a section:

Eoin Treacy's view

Here is a link to the full report.

Here is a section from the conclusion: 

Do data miners selling personal information to the highest bidders; or large manufacturers, insurers, etc. enjoying wide margins borne from market inefficiencies; or dominant energy and commodity suppliers now greatly influencing terms of trade and distribution; or correspondent money center banks currently controlling how wealth is measured and global payments are made; or even new upstart businesses in the sharing economy promising peer-to-peer commerce, but at a steep cost – all with their trillions in collective market caps – have to necessarily be completely replaced for an entire blockchain industry of less than $500 billion to be a good investment? 

The answer is “no”. Real revenues and earnings in the former will fade as more business is done in the latter. Blockchain technology is highly disruptive, economically deflationary, and shifts wealth creation from financial rent seekers and monopolists back to producers. It also solves the irreconcilable economic leverage problem facing global economies and policymakers today. Perhaps most important to those reading this, it will shift wealth from those with investment portfolios comprised of stocks and bonds in legacy businesses to those with equity and tokens in disruptive businesses and projects. 

The valley is a calcified forest of tired precedent and misguided expectations. The blockchain build-out will be accompanied by hollow threats from authorities losing their influence and characterized by asset volatility from tourist investors not knowing what they own or why. Look across it. You want that volatility.

Blockchain investing is all venture at this stage, regardless of whether the means to invest in it come in the form of protocol tokens or private equity in businesses ushering in the change. 

We believe the greatest payoff will come in five to ten years as certain tokens scale to equilibrium and as existing businesses looking to protect their franchises acquire private equity in blockchain infrastructure businesses. The smart play is to invest in actively managed, regulator-compliant investment programs, thoughtfully constructed to benefit from this process. Zero exposure to blockchain is the risky bet.

Bitcoin crashed in no uncertain terms in the first quarter of this year; losing about 70% of its value. As the first and largest of the cryptocurrencies it represented the epicentre of risk during the crash and therefore is also likely to be the most likely to form a lengthy base formation.

The price pulled back today from the psychological $10,000 level, forming a downside key reversal, suggesting at least near-term resistance has been encountered. The most likely scenario at present is for volatile ranging rather than the persistent trends we saw last year.

This is therefore the time to monitor the altcoin market for evidence of relative strength, most particularly if progressions of lower rally highs have been broken. The pace of innovation in the blockchain sector is so rapid that there is a realistic possibility that this crash will provide a viable entry opportunity for token that is likely to represent the next growth engine of the market.

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