(XRP) Archives

Alternative Tech Gets Hammered

The goalposts are narrowing with liquidity not making it out to the outer edge of the risk spectrum.

Bitcoin has had some weaknesses but the alternative currencies have really felt the guillotine drop.

When push comes to shove, the tide doesn’t lift all boats in eroding economic conditions.

Yes, we are about to start cutting rates, but that is because the economy is starting to stagnate and tech stocks have felt the full brunt of it.

Tech stocks have had a rough September and it was going to take a lot to move the needle with these lofty prices.

It was about time that investors took profits.

What has that meant for crypto?

It means a grim short-term outlook that the industry will need to endure.

11 U.S. spot bitcoin exchange-traded funds had their worst day in over four months after the report, as more than $287 million was collectively withdrawn from the ETFs.

The data was bad through the end of the week. On Friday, the Bureau of Labor Statistics reported a cooldown in the labor market with August payrolls falling short of expectations.

Last week, Cryptocurrency exchange Coinbase wrapped up its worst week of the year. Bitcoin miner Marathon Digital tumbled 20%.

September is historically a difficult trading month for crypto assets, with bitcoin notching an average loss of 4.8%.

The total market cap of crypto is down close to 30% from its 2024 peak of $2.67 trillion and is now at $1.9 trillion. Altcoins like Solana’s token, XRP, and Cardano’s ADA all dropped more than 8% last week.

While it was a rough week for risky assets of all sorts, investors over-indexed in crypto stocks had it particularly bad.

Coinbase, stuck in a court battle with the SEC over whether the exchange engages in unregistered sales of securities, plummeted 20% to its lowest since February. MicroStrategy, the bitcoin collecting company founded by Michael Saylor, dropped 26% in the last two weeks.

The top Bitcoin mining companies all ended last week with double-digit declines, led by CleanSpark’s 24% plunge. Riot Platforms lost 17%.

As investors turn to what’s coming, one big area of focus is the Federal Reserve.

If the Fed does in fact lower rates, I do see crypto and tech stocks reflating.

However, some alternative crypto stocks might get left behind and I fear for an asset like ether which was once seen as the second-best crypto.

Ether’s price has fallen to the point that suggests it really isn’t that important to the crypto industry.

Bitcoin has stood out as the all-weather crypto asset that could benefit most during the easing cycle.

In truth, technology stocks delivered some type of mini miracle by performing well when rates turned higher.

There is definitely a good chance that initiating a lower rate cycle might add rocket fuel to tech stocks.

Remember that tech stocks are the only equities that have grown their earnings during the past few years.

Much of the recent success is also due to chip stock Nvidia which has led the charge for tech companies surging past other big tech companies as the most influential stock in the world.

As we shake out the good from the bad, I urge readers to get into the best of breed, in tech and not crypto, when risk is initiated again.

I also urge caution to anyone who likes to get into crypto that it is a high-risk asset that could get dumped one day if people need capital to pay for mortgages and food.

June 2, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
June 2, 2022
Fiat Lux

Featured Trade:

(OFFLINE CRYPTO)
(BTC), (ETH), (SOL), (ADA), (XRP)

Offline Crypto

Bitcoin Letter

One of the first requirements to be anointed as a major cryptocurrency is to not be off.

This might seem highly intuitive, but many cryptocurrencies haven’t solved this one yet.

When a whole coin network is offline then the incremental investors look over to the greener pastures on the other side of the fence and ponder if it’s worth paying a higher premium for something that stays on.

Bitcoin can’t be turned off. Invest accordingly.

According to the Bitcoin Uptime Tracker, the Bitcoin network has been functional for 99.98742319836% of its lifetime.

I would consider that quite positive, even more so when I look at just what happened to altcoin Solana (SOL) which has been bundled routinely into the top 5 cryptocurrency conversation.

The Solana network has been plagued by a number of outages and it's been estimated that the proof-of-stake (PoS) blockchain has been down a total of eight times.

Each of these 8 times, the network suffers a massive loss of trust and confidence.

When an investor can’t get in touch with its capital on a network, that’s when full stop panic mode occurs.

It dumps insult to injury as the price has already tanked from $260 to $40 today.

Solana’s blockchain lost operational activity for over seven hours.

Solana’s development team has formally acknowledged some of the issues it was dealing with and how it “degraded performance.”

The team blamed “high compute transactions, which is reducing network capacity to several thousand transactions per second.”

Like many of the cloud companies plan for higher data usage by integrating more cloud data centers, the developers at Solana aren’t pre-emptively planning for bottlenecks.

That screams amateurism.

An investor must ask if this is the type of coin or network you want to put significant amounts of money on, and the answer is clearly no.

Only a fool would touch Solana even with its lofty $14 billion market cap.

Of course, with Solana going down again, the backlash has been relentless.

Many have joked if this is another Terra/Luna bankruptcy debacle even if Solana isn’t a stable coin.

Meanwhile, this gives credence to why investors should look to other coins such as ETH, XRP, and cardano (ADA).

Then there is the pure asset depreciation from being offline and SOL lost 9.9% in value against the U.S. dollar.

Coinbase also reported on Solana’s latest outage and noted that the exchange had to disable send and receives on the network.

Following last month's outage, one of Solana's recent improvements was supposed to resolve the network's congestion difficulties.

It’s not a secret that instead of a significant network update, the inverse has happened, and the Solana network issues have gotten worse.

Even worse, the repeated solutions appear to be mere stopgap measures with a high possibility of happening again.

These are terrible optics for a beleaguered crypto coin at a time when the entire industry is on the back foot.

The bellwether crypto coin Bitcoin has lost over half of its value triggering talks of a crypto winter.

Then mix in various implosions, developer mistakes, and high energy costs making crypto unprofitable to miners and there is a lot of negativity coalescing inside the industry.

In short, stick with the strongest cryptocurrencies namely Bitcoin and Ethereum, and don’t stray much further than that unless you are prepared to take a zero.

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