Decrypting Polynyas Perspective Why Are Most Cryptocurrencies Overvalued

Author: polynya
Translation: Deep Tide TechFlow
Table of Contents
Toggle
Introduction
Main Text
This article, written by cryptocurrency analyst polynya, discusses why most cryptocurrencies are overvalued. The article emphasizes that while the cryptocurrency market has experienced rapid growth, this is mainly 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, with a lack of real product-market fit behind the products, leading to the overall industry’s value inflation and detachment from reality.
Cryptocurrencies have found the vast majority of product-market fit through their function 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 also have significant demand.
Over the years, there have been various judgments about cryptocurrencies – fantasies about the imminent collapse of the global economy are not uncommon. Ironically, the global economy is actually very resilient, with economic growth continuing and productivity reaching new highs year after year. This has led to a greater demand for alternative stores of value like BTC or ETH. Cryptocurrencies have continued to rise under the push of currency demand.
This has created a new economy based on BTC and ETH. The issue is that the productivity in this new economy is very limited. When the vast majority of value comes from simple holding and speculation, this is to be expected.
Here, speculation becomes crucial. You will find that the market value of 70 cryptocurrencies exceeds $1 billion. Many tokens have existed for years, but product-market fit can be ignored. They have undergone dozens of transformations, but still have not found any effective use. In the foreseeable future, the product-market fit potential of new tokens is apparently very limited, but they are exaggerated to billions of dollars. The end result is that tokens that should be worth only a few million dollars may eventually reach billions of dollars one day, while hundreds of obviously worthless tokens still have market values in the millions, due to the huge speculative premium from the industry pillar (i.e., store of value). There is also a small problem where people mistakenly see infrastructure as a demand driver, rather than currency and speculation, but I have discussed this issue many times on my blog.
It is clear that there are some assets in the cryptocurrency space that are actually productive, but they are very few in number, and in most cases, they are undervalued relative to value stocks.
So, what is the solution? There is no solution, that is the nature of this industry. Speculate on high-risk speculative assets (similar to gambling), and then invest back in assets that you believe are stores of value.
Of course, all assets have a demand ceiling. We have already seen Bitcoin’s exponential growth end in 2017, with the growth rate declining, barely keeping up with the Nasdaq. Bitcoin’s diminishing returns will continue until the market for alternative store of value and related currency attributes approaches saturation. This will result in these severely overvalued tokens slowly declining in value to almost zero after years of sideways trading.
However, for now, the cryptocurrency market remains the craziest, most detached from reality, and most uncontrolled gambling market in the world, and this casino may exist longer than most people imagine.
Original Article Link
This article is authorized for reprint by Deep Tide TechFlow.