Memecoins
Here’s Why Some Cryptocurrency Investors Think There’s a Coin Supercycle Currently Existing
One of the most popular stories among cryptocurrency investors over the past six months is that the cryptocurrency sector is currently at the very beginning of a “coin supercycle” that will send piece of money valuations in the stratosphere. Such claims have also been made during previous cryptocurrency bull runs – and whether they turned out to be true or not, well-positioned investors behaved like bandits.
So let’s take the time to dive into the coin supercycle hypothesis to see how plausible it is and how you can make money from the continued rise in interest in the segment, as most predicted higher levels become reality or not.
The arguments in favor of the supercycle
The halving of Bitcoin(BTC -1.65%) mining reward, which occurred at the end of April, is proposed as the kickoff of the supercycle. The theory is that once the price of Bitcoin adjusts upward to account for the permanent reduction in the additional supply of new coins via mining, it will drag down the rest of the crypto ecosystem. currency with it, either immediately or after its own bull run ends. The idea is that investors will be willing to liquidate some of their supposedly huge gains to pursue growth elsewhere once Bitcoin’s momentum subsides.
At the same time, the uptrend will be fueled by huge amounts of new capital expected to flow inward following the approval of exchange-traded funds (ETFs) as the Grayscale Bitcoin Trust by the Securities and Exchange Commission (SEC). Before, investors at least needed some sort of cryptocurrency trading account to invest; With ETFs, people can buy a security whose value is closely tied to Bitcoin from their retirement accounts, opening the door for even greater demand to compete for the freshly limited supply of the coin. If other ETFs are approved, such as for Ethereumit could also have an additional incidental effect.
Solana (GROUND -5.70%), a popular blockchain to exchange coins even like dog hat at present, it would be the main beneficiary of capital inflows into Bitcoin. The argument here is that for new investors, this is the easiest channel to navigate because it works quickly, requires minimal fees, and has a wide selection of serious crypto projects. decentralized finance (DeFi) as well as countless coins with no intended use.
Additionally, there is reason to believe that investors as a whole want exposure to meme coins. Venture capital groups and hedge funds are now starting to get serious about coin investing because they want to capture some of the absurd returns that are sometimes possible in this area. Additionally, since 2021, many small investors are familiar with the idea of a meme coin, having invested in Dogecoin Or Shiba Inu and seen their impressive races.
Then there is the situation with inflation and the Federal Reserve’s willingness to mitigate it. Crypto investors who advocate the supercycle suggest that the Fed will likely cut its prime interest rate at least once in 2024. As the cost of borrowing falls, there is therefore more capital to invest further down the road. the risk curve than before, and towards the most speculative investments like memes.
Finally, supercycle proponents point to a growing sense of economic discontent among younger crypto investors. These investors have faced significant financial obstacles to achieving their life and financial goals, particularly for key achievements like homeownership, and so they are becoming increasingly nihilistic about their chances of future success . Therefore, their alleged desire to invest in the riskiest corners of cryptocurrency, where they believe life-changing returns lurk, will drive the coin’s bull market all the more intensely, even after that the Bitcoin catalysts have occurred.
Don’t put the horse before the cart
So far, it is ambiguous whether the coin supercycle hypothesis will turn out to be true or false. That being said, most of the arguments for this solution pass the sniff test.
The Halving Process will in fact ultimately lead to a scarcer supply of Bitcoin, and the ETF will facilitate the entry of capital into the market. crypto ecosystem. Solana is indeed the lowest-friction channel to use in my experience, and there is already a rich set of software and hardware tools that investors might need to research and transact. The memes of the moment are on this channel and they are gaining notoriety among the public day by day.
But predicting the likelihood of a rate cut is vague to say the least. Market expectations regarding the Federal Reserve’s decisions in this area have been repeatedly contradicted over the past year.
Likewise, it’s likely that there are at least a few disenchanted young crypto investors. Still, predicting that their desperation will cause them to invest in meme coins in large numbers over a specific period of time is a bit of a stretch, even if the gist of it makes sense.
Don’t take this to mean that you should or shouldn’t invest in coins or other cryptocurrencies at this time. If your wallet is diversified and you have additional capital to allocate to a riskier investment, it’s worth considering buying a coin like Solana or Bitcoin to start. And if you can tolerate volatility, picking one or two coins to make a small investment might be appropriate – but don’t get caught up in the hype around the supercycle and don’t overcommit if it starts to fade. accelerate.
Alex Carchidi holds positions in Bitcoin, Ethereum, Shiba Inu, Solana and WIF. The Motley Fool posts and recommends Bitcoin, Ethereum, and Solana. The Mad Motley has a disclosure policy.