Will the Real Crypto ‘HODLers’ Please Stand Up?
The volatility in crypto markets has been unforgiving, raising questions whether the long-term hold is still a good strategy, especially given that the market has seen an influx of participants that do not necessarily share the views of the original crypto pioneers.
The crypto market continues to test the resolve of true HODLers. The sea of red is now more or less a daily occurrence, and it is tougher than ever to separate “value” coins from “hype” coins. The positive correlation between the coins, which is what some investment banks warned about, is partly to blame – there is simply very little to differentiate between the coins. This is something that upcoming ICOs will have to learn to live with. But maybe there is another way…
The majority of the coins that are suffering from this lethargic performance are those that have been built on nothing more than an idea. They are a promise that the team will develop a real-life working product, that it will be better and faster than the current alternative, and more importantly – it will have users!
The reality is not as simple. While it is great to have a ground-breaking idea, it needs to be executed in a way that is commercially viable and beneficial to token holders. The teams, therefore, need to have the technological acumen to build the actual platform and also be commercially savvy enough to navigate the ever-changing crypto landscape. Projects that might have looked good on paper a year ago will not necessarily have a place in the market the following year if regulatory conditions change so much that it prevents the token holders from using the platform.
Another factor at play is that the market (the speculative secondary market) is much more accessible. More and more people are playing the crypto “roulette” with the hope of achieving spectacular returns. Behavioral economics come to play given the resultant herd mentality of market participants. The net result is the struggle between the real “HODLers”, the believers of the technology and its use, vs those that simply jumped on the bandwagon to make a quick buck. This makes the token valuation, following secondary market listing, particularly difficult to conduct.
So does this mean that there is no longer space for “HODLers”? Does the market favor active trading style as opposed to passive long-only style? The answers are not straightforward but to claim that “HODL” is dead would be wrong. The market is suffering from the ongoing regulatory uncertainty at the same time that there has been a clampdown on lax advertising practices, with Facebook and Google putting restrictions on advertising crypto related products. However, the underlying reality remains that crypto is here to stay, regulation and market maturity will clean up the crypto-economy, and the market will adapt to the new regime.
It might be that the market needs to go through a phase of consolidation or decommissioning as proposed by the team behind CoinJanitor. However, while everyone is focusing on the “broken” crypto market, very few have looked at trading facilitators – i.e. exchanges and trading platforms. HODLers are ought to look for venues that provide good liquidity, promote ethical governance, and above all, operate to benefit token holders!
However, defining terms such as ethical governance is not simple, nor straightforward. Exchanges have come under scrutiny for listing tokens that at best slowly “die” given the limited trading activity. In the case of Centra Token (CTR), prompted exchange desk Binance to delist the token from its platform after the US Securities and Exchanges Commission (SEC) charged the owners of Centra Tech with fraud. Based on that alone, there is reason to argue that exchanges should take on more responsibility and conduct much more thorough due diligence on the token, request information on the proposed business plan, tokenomics, KYC/AML process, and of course, the whitepaper.
What do you think is the best trading strategy at the moment? Let us know in the comments below.
Images courtesy of Warner Bros. Pictures/300, DepositPhotos
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