Cryptocurrency Analyst Polynya’s Perspective: Why Are Most Crypto Assets Overvalued?

Cryptocurrency Analyst Polynya's Perspective: Why Are Most Crypto Assets Overvalued?

Cryptocurrency Analyst Polynya's Perspective: Why Are Most Crypto Assets Overvalued?

Title: Overvaluation of Cryptocurrencies: A Result of Speculation and Lack of Market Fit

Introduction:
This article, written by cryptocurrency analyst polynya, discusses the issue of why most cryptocurrencies are overvalued. It emphasizes that while the cryptocurrency market has experienced rapid growth, this is primarily due to their function as alternative or speculative stores of value, rather than actual productivity. polynya points out that a large number of cryptocurrencies are overvalued, as they lack a genuine market fit for their products, resulting in an inflated industry value that is disconnected from reality.

Main Text:
Cryptocurrencies have found a significant market fit as alternative or speculative stores of value. This is why Bitcoin continues to dominate the market, even after 15 years. Ethereum has also shown currency attributes since 2020. Together, they account for over 75% of the market share (excluding stablecoins) and even higher in terms of liquidity. Tokens like XRP and ADA have also gained considerable demand.

Over the years, there have been various opinions about cryptocurrencies, often centered around the notion of a global economic collapse. Ironically, the global economy has proven to be highly resilient, with continuous growth and increasing productivity year after year. This has led to a greater demand for alternative stores of value like BTC or ETH. Cryptocurrencies have remained highly valued, driven by the demand for currency.

This has created a new economy based on BTC and ETH. The problem is that the productivity within this new economy is extremely limited. It is expected when the majority of value comes from simple holding and speculation.

Here, speculation becomes crucial. You will find that there are 70 cryptocurrencies with market caps exceeding $1 billion. Many of these tokens have been in existence for years, yet their market fit can be disregarded. Despite undergoing multiple transformations, they have failed to find any meaningful utility. In the foreseeable future, the market fit potential for new tokens appears to be very limited, yet they are inflated to billions of dollars. The result is that tokens that should only be valued in the millions may eventually reach billions in value, while hundreds of seemingly worthless tokens still have market caps in the millions due to speculation premiums from the industry’s backbone, i.e., value storage. There is also a minor issue of people mistaking infrastructure as a demand-driving factor instead of currency and speculation, which I have discussed multiple times on my blog.

It should be noted that there are some assets in the cryptocurrency space that actually have productivity, but they are few in number and often undervalued compared to value stocks.

So, what is the solution? There is no solution; this is the nature of the industry. Speculate on high-risk assets (similar to gambling) and then invest back into assets you believe are stores of value.

Of course, all assets have a demand limit. We have already seen Bitcoin’s exponential growth end in 2017, with subsequent declining growth rates struggling to keep up with the Nasdaq. The diminishing returns of Bitcoin will continue until the market for alternative stores of value and related currency attributes approaches saturation. This will lead to these significantly overvalued tokens gradually declining in market value to almost zero after years of ranging.

However, for now, the cryptocurrency market remains the craziest, most disconnected from reality, and least controlled gambling market in the world, and this market’s existence may last longer than most people imagine.

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