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The crypto market is in free fall. The total market cap of all cryptocurrencies is heading down to the trillion dollar mark. Only six months ago it sat at $2.9 trillion, a drop of 57%. That is massive.

We all knew crypto was risky. These violent movements back up that thesis.

The crypto world appears bleak. Confidence is at an all time low, according to the often referred to Fear and Greed index. There are the major problems with the stable coin UST, talk of recession, interest rate hikes and of course unsustainable overblown valuations. As a result there has been massive sell offs and volumes are down by 50% plus.

The big question is, have we seen the end of this carnage. I think we can safely say we haven’t. Why? I hear you ask.

Because valuations are still out of sync with reality. Let’s take a look at a few coins to demonstrate that opinion.

XRP is a project that is arguably going nowhere. It is not on the cutting edge of technology, has limited adoption and what adoption it does have few utilize its coin. But the market values XRP at a whopping $41 billion. That is even forgetting about the uncertainty of a lawsuit with the SEC.

ApeCoin is another example of why the market went crazy and is still living in cloud cuckoo land. ApeCoin is in essence a memecoin which is going to act as the backbone of a metaverse yet to be launched. Value $8 billion.

Filecoin is our final example of the madness still inherent in the market. Filecoin is a quality project that leads the way in decentralized data storage. But its revenues are minuscule, $9 million in the last quarter. Its market cap reached nearly half a trillion dollars a year ago. That has come down 96% to a still unrealistic $16 billion.

History repeats itself. Markets are slow to recognize potential but when they do values always run away with themselves eventually settling back after a period of deep corrections. Some investments fail to ever recover, others go on to exceed these historic highs which seemed so impossible in those dark days.

Let’s be honest, the exuberant valuations which still prevail in the crypto market are based on the perfect execution of business plans assuming massive adoption and market domination. As my old father always said, there are many a slip between cup and lip. This is a long overdue reality check.

What should you do? Wait it out. I read an article a few days ago in the Wall Street Journal which highlighted the many investors who were buying the dip. That is a brave and sensible strategy when an investment has seen its value drop below its inherent or long term value. Bitcoin and Ethereum are possible candidates for this.

Quality assets almost always exceed their previous all time highs, eventually. Bitcoin did after hitting $20,000 back in December 2017. The price then dropped like a stone. It took 3 years to breach that magic number again. But it went on to reach new heights. That magic figure now stands at $69,000.

Bottom line. Find quality projects that you truly believe in and where their intrinsic values are below their long term value and then buy on the dip in small increments.

How do you work out the intrinsic value? That is the billion dollar question my friends! But I can tell you what it is not based on. It is not based on hype and following the market. What it is based on is fundamentals such as revenue, number of users and most importantly money flowing back to token holders. If the companies behind these tokens are keeping most of the money generated from the protocol then you should vote with your cash and sell. As they say, if you look around the room and you can’t see the chump sitting at the table that is because the chump is you!

With the market so sensitive to any signs of bad news there could be other disasters waiting in the wings. What happens for instance if the biggest stable coin of them all, Tether, breaks its peg? These are the kind of conditions where that could finally happen. We all know that a large proportion of the assets backing its Tether coin are garbage. Many of them are investments into DeFi platforms and other crypto projects. Need we say more…

When there is blood on the streets it feels like the sun will never rise again, that the birds will never sing and that your local bar will never have the same jovial atmosphere. But it never lasts. The human race can’t exist in darkness forever.

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Not Financial Advice

This article does not constitute financial advice or a recommendation to buy in any way. Always do your own research and never invest more than you can afford to lose. Investing in cryptocurrencies is high risk, and you could lose 100% of your investment. The article should be treated as supplementary information to add to your existing knowledge.