We live and play in a speculative industry, whether it's crypto, NFTs, or emerging technology (AI for example). Today’s blog aims to explore the advantages and disadvantages of the speculative nature of our industry, and share some things to think about when investing your time, effort, or money.
This is not financial advice, but rather my insights, opinions, and thoughts on the industry I choose to spend my time in.
This is such a broad subject, but I guess we need to start somewhere. I am choosing the why. Why is this industry of crypto, NFT's and emerging technology so speculative?
What are the reasons behind this speculative nature? There are many, and I will inevitably miss some. Feel free to share your thoughts on this and let me know what I missed. One of the ways I learn is through discussion and development of ideas.
This market is Highly Volatile. There is a perceived and actual Lack of Clear and Defined Regulation. Prices are nearly always driven by Market Sentiment. Uncertainty exists regarding regulation and adoption. Short term strategies or Speculative Investments tend to be the preferred strategy for many users. The speed of Technological Developments. There is a Lack of Intrinsic Value, in comparison to more stable investments.
These 7 factors are not the only reasons the crypto space is such a speculative space, but they offer the foundations we need in terms of understanding that speculation. At least from my perspective.
Reasons for Crypto/NFT's being a Speculative industry
Lack of Clear & Defined Regulation
Market Sentiment
Uncertainty
Speculative Investments
Technological Developments
Questions about Intrinsic Value
Volatility
The obvious question is why? Why do those things specifically encourage speculation? The aim is to try and explain that a little. A lot of these reasons are interlinked and compound each other. And like I said above, this is by no means an exhaustive list of reasons.
Lack of Clear & Defined Regulation - Although some regulation exists, and more regulations are due, there is still a lack of clarity. This leads to market manipulation and fraud, with little protection for investors.
Market Sentiment - Social Media seems to dictate crypto markets at times. Positive or Negative news can have a drastic impact on a tokens price, driving further unpredictability.
Uncertainty - From the day-to-day uncertainty of project longevity to the the long term future of the space due to regulations, technological advancements and market adoption, we never know what's round the corner.
Speculative Investments - Many seek quick wins rather than looking for long term investments. While this speculation can drive short term prices up, it often leads to a sorter life cycle for the investment and a drop to zero.
Technological Developments - Crypto Currencies and Blockchain Technology are new and still being explored. Investors often take higher risks in hopes of finding big wins.
Questions about Intrinsic Value - In other markets investors something to represent an investment, for example property investors have a house, stock investors receive stocks which represent ownership in a company. Crypto Currency's are generally worth what the market is willing to pay.
Volatility - Fluctuations in prices often happen quickly and wildly. Bitcoin and Ethereum are more stable than meme coins, but they still experience significant volatility compared to traditional markets.
Additional factors like 24/7 trading, low liquidity (in comparison to traditional markets), no annual reports, a lack of transparency, herd behaviours and macro economic factors such as interest rate changes create a hotbed of volatility and instability. The lack of reputability information for projects and tokens makes weighing the risks of long-term investment incredibly challenging, which in turn encourages short-term investments.
There are issues everywhere when it comes to encouraging stability in the Crypto market.
There is the hope that regulation will bring more stability to the market. I think it likely will, over time. Regulation adds trust to big financial players and every day consumers. This leads to further stability because it validates the Crypto market and increases the money invested here. Higher trading volumes mean that prices are impacted less by large trades. It won't stabalise the markets, but it will reduce the volatility.
The emerging technology we deal with means that markets won't truly stabalise until we better understand the technologies and their impact. It's almost like we are still in a proof of concept stage regarding blockchain technology, with benefits and risks yet to be fully worked out. Understanding the impact of regulation, identifying who the leading companies/projects are, and seeing what AI does to all markets will eventually lead to less speculation and, in turn, less volatility.
Not only do all of these things have an impact on market sentiment and therefore the speculative nature of the markets, a lot of them interlink and many of them compound each other. For example, negative sentiment regarding a regulation announcement could drive investors to sell. Speculative sellers would drive further selling across the market, leading to a potential larger drop in prices, creating social media responses, encouraging more selling. And the issue compounds.
Meme coins are arguable the most volatile of all the things in crypto (maybe PfP's come close), I think it is worth reading Vitalik Buterin's article on them here. I found it insightful, informative and a little provocative.
I have spoken a lot about why I think the Crypto Currency market is speculative, but I think it extends beyond that. I feel that many creators are speculating with their time and effort in the hope of making an income. Many more are trying to create their dream utilising the technological opportunities that exist. The new and exciting nature of the technology sector drives the potential and speculation of our time, effort and money.
This isn't inherently good or a bad - it simply is. We shape our own experiences in this market. There are some behaviours driven by speculative markets that are unpalatable to say the least and that's before you get to outright market manipulation. There is also an incredible amount of opportunity for individuals in terms of investment success. As well as genuine creative freedom for a number of people.
For me, financial freedom and an opportunity to create and own your own dream are possible because of the speculative nature of our industry. Without the exploration of this technology and excitement about its possibilities and potential, I wouldn't have met any of you, or had the incredible opportunities I have had since being in this industry.
I enjoy diving into these topics and thinking about them in more detail. As I said above it, helps me develop me thoughts and understanding of a subject. Looking at how the speculative nature drives a lot of the things I like about the industry as well as a lot of the things I don't like caused me a little consternation writing this. But, it's what we make of it!
I am still enjoying all of the work that is going into Voice Notes Suck. I spoke about how AI has helped with some of our output and while you can get it to help write your posts for X, it won't schedule them yet! Jay and I are recording Series 2 as you read this, more information about that coming soon. What I can tell you is that the last episode of Series 1 will be released on 23rd July and there will be a break before Series 2 is released.
Last and by no means least is FCancer 2024. Preparations are well under way. We have nearly finalised the events that will happen between 02nd - 08th September. There will be an art auction, a generative collection, a raffle, X Spaces to promote the event and more ways to get involved. We have nearly finalised sponsorship information, the Polygon Alliance website should be updated this week and the open call for the art auction has opened on Hug.
It's all rather exciting, I am looking forward to everything, including the hard work. Keep your eyes peeled for more information!
I think I need to get another picture or two on Uncut, maybe even sort out a schedule of releases. There always seems to be things to be doing. Many, many things to be doing, most of it is fun to be fair! Today's collectible image is part of todays cover image, it's on Base again and costs platform fees only.
Thank you for reading this issue, I always appreciate your time. I will be back with another issue on the 08th July. Until then, look for the smiles.
