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Crypto Market Musings

• As I write this, Bitcoin has been trading just under $30,000. About a week ago, it was trading closer to $31,000. And in between, it dipped below $29,000. This will probably be Bitcoin’s range until the next round of bad economic numbers comes out.
• Right now, the stock and crypto markets are pretty closely correlated. So if the equity markets get spooked, so will the crypto markets.
• The crypto bear market will likely continue for at least a few months, if not longer. So make sure your portfolio is set up for the long run. Focus exclusively on good projects. Avoid speculative plays. Never invest money you can’t afford to lose. And look for good spots to buy into long-term positions.

What I'm Thinking About

Stablecoins have had a rough few weeks. Terra, which was supposed to maintain parity with the dollar, is practically worthless now. (I wrote about why this happened last week). DEI lost its peg with the dollar last week and has been recently trading at around $0.59. Even tether, crypto’s most popular stablecoin, briefly lost its peg last week when it traded around $0.97.

Stablecoins are critical parts of the crypto ecosystem. They’re important settlement tools for both decentralized finance and smart contracts. And they’re utilized far more than people realize. But they’re also clearly vulnerable.

Stablecoins are a necessity right now because the crypto markets are so volatile, and the protocols for transferring assets/value between different crypto ecosystems/networks are just being developed.

As the crypto markets mature, the need for and reliance on stablecoins will change. But until then, the crypto community needs to come together and figure out how to best stabilize the system. Stablecoins losing their pegs might help a handful of traders and prompt giggles. But in the long run, it’s damaging to the ecosystem. It’s an issue that needs solving.

And Finally

The Chinese government doesn’t like Bitcoin mining. It tried banning it last year. The initial ban was successful. But Bitcoin mining in China is back. Bitcoin’s resilience is remarkable. It’s one of the strengths of cryptocurrencies. Hopefully, other governments will take notice and start implementing more reasonable regulatory regimes.