For cryptos to sustain, its use case and adaptability is an important matrix rather than the price. This was the view of Meltem Demirors, Chief Strategy Officer at Coin shares who appeared on CNBC’s Fast Money and shared her views
Comparing cryptos to early internet companies
Meltem reiterated the fact that cryptos are still not matured enough it needs to be looked like early stage internet companies. She believes Bitcoin is still hard to grasp and people usually get the narrative wrong. For most investors the narrative is still price and price are a really imperfect metric to look at, instead, its utilization is something that should be looked at.
Using the analogy of early internet companies in 1999 Meltem explains that for some of the early internet and technology companies, that made their peaks in and around the dotcom boom took some years to recover back to their highs. To quote here she says
“It took Amazon 9 years to move from peak, trough, and peak again, so if anyone invested in Amazon would actually need 9 years to recover their capital”
— CNBC’s Fast Money (@CNBCFastMoney) August 13, 2018
According to her, the same was with Intel which took 15 years to come back to its peak and for Microsoft, it took 17 years. New Technologies take a long time to understand.
She believes because of FOMO (Fear of Missing Out) a lot of people enter the markets and that’s what creates the speculative bubble. This inflow of money leads to capital formation all of that is being deployed now this is what will be driving the next rally.
According to her the key metrics to monitor cryptos today are a total addressable market and the penetration levels something that every startup investor looks at. What is important to pick up now is the projects that will hold capital and stay there for the long term.
The use case is the key for cryptos to grow
What Meltem put forward was not something new but it’s necessary for investors to remember that for. In the mad rush of prices, people tend to forget the fact that its use case, penetration and addressable market is something that gives value to cryptocurrency and not just the price. It’s their partnership with real businesses that hold the key fundamentally at least.
One has to believe the use case and the store of value narrative for cryptocurrencies is something that will define how good a project is and its sustainability in the long run. If this narrative is not followed, people will end up losing their capital as the understanding of cryptos will take some time to come in. The prices till then will be volatile as there FUD’s and FOMOs will continue to play their part.
Understanding the narrative and having a long-term patient approach is something that could make money for investors and that’s what I believe anyone one who understands cryptos will follow.
Will cryptos follow the trends of internet companies like Amazon and Microsoft laid down? Do let us know your views on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.