- Cryptocurrencies have little intrinsic value and traders are just using momentum to profit.
- According to a Starkiller Capital paper, there is little evidence that fundamentals influence cryptocurrency prices.
- In the absence of fundamentals, traders must rely on a series of narratives to generate momentum.
According to Starkiller Capital’s report, cryptocurrencies have little intrinsic value or fundamentals to rely on, and traders are riding a “hot ball” of momentum.
In a paper authored by Corey Hofstein’s Lee Drogen, crypto investment firms “have a long track record of market participants valuing these assets using a set of commonly agreed upon fundamental variables. “Cryptocurrencies have little intrinsic value in the sense that there is no , Kevin Otte on Wednesday.
The study points out that there are no fundamental metrics such as price-to-sales ratios or price-to-profit margins to explain the profits seen in cryptocurrencies. Without these fundamentals that guide the trajectory of the market, crypto traders rely heavily on a “handful of stories” to influence the price of digital assets. of the asset itself.
This dynamic is driven by the online community of crypto traders, the large amount of fraud and market manipulation in the industry, and the fact that crypto traders are “very online” and tend to react strongly to the unfolding of certain market narratives. may be encouraged.
Examples include Elon Musk pitching Dogecoin on Twitter, Meme Coin Soars in ValueWhen Mark Zuckerberg renames Facebook to Metagenerated interest and investment in the Metaverse and related tokens.
“We believe the momentum effect will be self-fulfilling as market participants try to drive the gold hotball forward,” the paper said.
The lack of intrinsic value behind crypto reflects criticism from prominent skeptics.nobel economist Paul Krugman denounced crypto Its value is heavily fueled by hype and pervasive speculation, hence the term “Ponzi scheme”.
JP Morgan CEO Jamie Dimon believes Bitcoin will be ‘worthless’ in 2021, questioning the cryptocurrency’s then $1.1 trillion valuation. . He said the value of the world’s largest cryptocurrency has since plummeted to $349 billion. coin market capitalization.