The Expert's Insights on the Cryptocurrency Hype
Date: 2023-12-12 Author: Dima Zakharov Categories: BLOCKCHAIN, BUSINESS
In the fast-paced world of cryptocurrencies, understanding what drives the excitement and frenzy can be challenging. Colin Wu, an expert in the field, shares his insights into the factors that contribute to the hype surrounding digital currencies.
Test and Comparison:
According to Wu, the market capitalization of benchmark cryptocurrency projects depends on various factors, such as the scale of assets, competition within the same category, and the historical status of the company that first introduced a similar product. Sustaining the valuation requires "moral coordination," or else numerous competitors will inevitably emerge.
Status and Importance:
The evaluation of valuable projects can be compared by determining their level based on the size of the entire industry, such as DeFi, and the leading startups in that sector. For instance, the importance of Chainlink allows it to have a capitalization in the billions of US dollars (USD) and the status of a "unicorn."
Ponzi and Speculation:
The mechanism is simple; it creates the expectation that "those who buy first will profit from those who acquire assets later." Everyone believes they are faster than others and trusts that they have become token owners before the turning point. According to Wu, "Many Ponzi schemes in the crypto industry are public, not fraudulent or internal accounts. The biggest beneficiaries are unrestricted manipulators and project participants."
FOMO - Fear of Missing Out:
Perhaps the industry's most significant challenge is the anticipation that cryptocurrencies will be popularized and accepted worldwide, often referred to as "hope." This applies to blockchain games, social applications, and recently, projects based on artificial intelligence (AI) technology.
In conclusion, Colin Wu's insights shed light on the various factors driving the hype around cryptocurrencies, emphasizing that expectations, rather than underlying fundamentals, play a significant role in the market's behavior. As investors continue to navigate the volatile crypto landscape, understanding these forces can be crucial for making informed decisions.
