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So far, crypto has gone through multiple market cycles lasting about four years each. At the peak people get euphoric and think it will solve all the world's pr

So far, crypto has gone through multiple market cycles lasting about four years each. At the peak people get euphoric and think it will solve all the world's problems, then in the trough people think it's all on its way out - that it will slowly fade out of public consciousness until it's forgotten. I believe the reality is somewhere in between. But one thing is for sure: during the trough of every cycle, there's always someone posting that they wonder if crypto is dead and never coming back.

iskander 3y ago
It would be a shame if this keeps happening, like: (2013) Bitcoin and its clones failed at all their stated purposes, (2017) the ICO craze left nothing of value, (2021) the DeFi/NFT bubble also left nothing but rubble. This stuff is zero sum, shuffling money without creating new things of enduring value.
- ogogmad 3y ago
  At the moment, you can buy drugs with it online. Don't know if that will last, though.
  - iskander 3y ago
    Can you still!? It's so incredibly traceable these days and every iteration of Silk Road gets busted, no?
    - ogogmad 3y ago
      Dark web markets absolutely still exist. The traceability problem is at least partially solved using mixers. I don't know everything there is to know here, like how easy it is to get back fiat.
    - solumunus 3y ago
      The markets get busted (or become scams), the dealers not so much. If you’re on these markets regularly for years you’re probably communicating directly with sellers at this point.
    - hifromwork 3y ago
      [flagged]
- sneak 3y ago
  Every claim in your comment is factually false.
  - kibwen 3y ago
    Bitcoin did factually fail at its stated goal, as laid out in the original whitepaper. Bitcoin has not succeeded at being a peer-to-peer currency, because the "peer-to-peer" part went out the window when users stopped hosting their own nodes, and the currency part was abandoned when people realized that transaction throughput is fatally low.
    - kinakomochidayo 3y ago
      Well, more like it’s no longer p2p after the 2017 hard fork and people are being pushed to use Lightning which centralizes over time through hub and spoke model, and many people prefer to use custodial wallets.
treyd 3y ago
It's conjectured that this is due to Bitcoin's subsidy halving schedule, which is every 210000 blocks or ~4 years. The reasoning is that the supply shock trends prices upwards and the rest of the market tracks Bitcoin due to many trading pairs between it and other cryptos. But the shock gets weaker over time and hopefully the nonsense will as well.
- anonporridge 3y ago
  It is interesting, because while the shock does get weaker in relative terms it's getting stronger in absolute terms. i.e. a billion dollar shock to a billion dollar asset is relatively bigger than a 100 billion dollar shock to a 500 billion dollar asset (bitcoin's current "market cap"), but the latter requires 100x the size of wealth flow. The next supply shock will also be interesting in its own right, specifically because it will plunge bitcoin's inflation rate to below that of gold, from 1.7% now to 0.84% in 7 months. If nothing else, that will re-highlight bitcoin's digital gold narrative and potentially pull in more wealth flow that otherwise might have flowed into store of value assets like gold. Bitcoin at current price and inflation rate requires $9 billion per year net inflows to absorb newly mined coins. In 7 months after the halving, it will only require $4.5 billion per year to maintain it's current price of $27,000. So, either it's net inflow will suddenly cut in half and the price will stay the same, or the current net inflow of $9 billion will force the price up until it reaches equilibrium, which usually triggers a market frenzy as outsiders see the gains and pile in. For some context with gold, there theoretically exists about $200 billion of wealth flowing into it each year just to absorb newly mined gold and keep the price stable.
  - georgeecollins 3y ago
    This is great analysis. The only caveat I would add is that while bitcoin is commonly priced in $ (fiat USD) it is much more commonly bought and sold in USDT. In fact, if a bunch of actors decided to sell bitcoin there might be plenty of USDT for that but not US$. Some of that is due to the fact that exchanges don't due proper KYC and have trouble maintaining US banking arrangements. Some of it may be that the market is propped up by less fiat then it would need to be liquid in fiat. I am not saying that as a problem-- maybe-- I don't know. I am just saying that as if you say bitcoin currently requires $9b usd a year to maintain its price that is not actually true.
grotorea 3y ago
Well, there's always the possibility that this time it will be the last. Maybe the last peak is when it reaches global awareness and there's no new people to bring into the system. And I suspect it already reached that in the last cycle with Superbowl ads and Filipinos working in Axle Infinity. Although, I feel cryptocurrency is already too big to ever end completely.
- lurker919 3y ago
  The new people in the next cycle are the freshly graduated high schoolers and new grads who weren't following the news previously and have their joining bonuses and RSUs waiting in the bank.
  - phatfish 3y ago
    Can they pump Crypto as high as a good proportion of the "western" population widdling their thumbs for 6 months or more during COVID? I say western because they were the people with the disposable income and living under governments that could support furlough/stimulus payments.
- ogogmad 3y ago
  It needs energy to be expended continuously in mining it, if it uses PoW. So it might end one day.
  - cesarb 3y ago
    > So it might end one day. Only if the mining stops abruptly. Otherwise, the automatic difficulty adjustment allows it to keep working even with a reduced energy expenditure. In the extreme, a single computer running in a museum could be enough to keep the blockchain working forever.
    - ogogmad 3y ago
      A single computer in a museum would be vulnerable to 51% attacks. It would also be too illiquid to recoup costs.

iskander 3y ago

It would be a shame if this keeps happening, like: (2013) Bitcoin and its clones failed at all their stated purposes, (2017) the ICO craze left nothing of value, (2021) the DeFi/NFT bubble also left nothing but rubble. This stuff is zero sum, shuffling money without creating new things of enduring value.

ogogmad 3y ago
At the moment, you can buy drugs with it online. Don't know if that will last, though.
- iskander 3y ago
  Can you still!? It's so incredibly traceable these days and every iteration of Silk Road gets busted, no?
  - ogogmad 3y ago
    Dark web markets absolutely still exist. The traceability problem is at least partially solved using mixers. I don't know everything there is to know here, like how easy it is to get back fiat.
  - solumunus 3y ago
    The markets get busted (or become scams), the dealers not so much. If you’re on these markets regularly for years you’re probably communicating directly with sellers at this point.
  - hifromwork 3y ago
    [flagged]
sneak 3y ago
Every claim in your comment is factually false.
- kibwen 3y ago
  Bitcoin did factually fail at its stated goal, as laid out in the original whitepaper. Bitcoin has not succeeded at being a peer-to-peer currency, because the "peer-to-peer" part went out the window when users stopped hosting their own nodes, and the currency part was abandoned when people realized that transaction throughput is fatally low.
  - kinakomochidayo 3y ago
    Well, more like it’s no longer p2p after the 2017 hard fork and people are being pushed to use Lightning which centralizes over time through hub and spoke model, and many people prefer to use custodial wallets.

treyd 3y ago

It's conjectured that this is due to Bitcoin's subsidy halving schedule, which is every 210000 blocks or ~4 years. The reasoning is that the supply shock trends prices upwards and the rest of the market tracks Bitcoin due to many trading pairs between it and other cryptos. But the shock gets weaker over time and hopefully the nonsense will as well.

anonporridge 3y ago
It is interesting, because while the shock does get weaker in relative terms it's getting stronger in absolute terms. i.e. a billion dollar shock to a billion dollar asset is relatively bigger than a 100 billion dollar shock to a 500 billion dollar asset (bitcoin's current "market cap"), but the latter requires 100x the size of wealth flow. The next supply shock will also be interesting in its own right, specifically because it will plunge bitcoin's inflation rate to below that of gold, from 1.7% now to 0.84% in 7 months. If nothing else, that will re-highlight bitcoin's digital gold narrative and potentially pull in more wealth flow that otherwise might have flowed into store of value assets like gold. Bitcoin at current price and inflation rate requires $9 billion per year net inflows to absorb newly mined coins. In 7 months after the halving, it will only require $4.5 billion per year to maintain it's current price of $27,000. So, either it's net inflow will suddenly cut in half and the price will stay the same, or the current net inflow of $9 billion will force the price up until it reaches equilibrium, which usually triggers a market frenzy as outsiders see the gains and pile in. For some context with gold, there theoretically exists about $200 billion of wealth flowing into it each year just to absorb newly mined gold and keep the price stable.
- georgeecollins 3y ago
  This is great analysis. The only caveat I would add is that while bitcoin is commonly priced in $ (fiat USD) it is much more commonly bought and sold in USDT. In fact, if a bunch of actors decided to sell bitcoin there might be plenty of USDT for that but not US$. Some of that is due to the fact that exchanges don't due proper KYC and have trouble maintaining US banking arrangements. Some of it may be that the market is propped up by less fiat then it would need to be liquid in fiat. I am not saying that as a problem-- maybe-- I don't know. I am just saying that as if you say bitcoin currently requires $9b usd a year to maintain its price that is not actually true.

grotorea 3y ago

Well, there's always the possibility that this time it will be the last. Maybe the last peak is when it reaches global awareness and there's no new people to bring into the system. And I suspect it already reached that in the last cycle with Superbowl ads and Filipinos working in Axle Infinity. Although, I feel cryptocurrency is already too big to ever end completely.

lurker919 3y ago
The new people in the next cycle are the freshly graduated high schoolers and new grads who weren't following the news previously and have their joining bonuses and RSUs waiting in the bank.
- phatfish 3y ago
  Can they pump Crypto as high as a good proportion of the "western" population widdling their thumbs for 6 months or more during COVID? I say western because they were the people with the disposable income and living under governments that could support furlough/stimulus payments.
ogogmad 3y ago
It needs energy to be expended continuously in mining it, if it uses PoW. So it might end one day.
- cesarb 3y ago
  > So it might end one day. Only if the mining stops abruptly. Otherwise, the automatic difficulty adjustment allows it to keep working even with a reduced energy expenditure. In the extreme, a single computer running in a museum could be enough to keep the blockchain working forever.
  - ogogmad 3y ago
    A single computer in a museum would be vulnerable to 51% attacks. It would also be too illiquid to recoup costs.