Rocky Week for Crypto Investors

The crypto markets have been falling pretty hard this week.  It seems many people think this is a "correction" or "manipulation due to wall-street futures expiring" or 'Chinese New Year" or several other factors.  What no one seems to be doing however, is a little bit of math.

Let's take Ripple.  A couple of weeks ago they were number 2 in market cap behind Bitcoin and reached highs of over $3.00.  The thing is, their market cap was at $130 billion dollars.  Here is a platform making $0 in revenue right now and they announce a partnership with MoneyGram.  MoneyGram is a company on the NYSE sitting at a market cap of $676 million.  Ripple holders immediately start tweeting and posting to Reddit and other avenues that they are going to "moon" and double in price.

Wait a second?  Here is a company that has dropped from $130 billion to $40 billion in a week or two and adding a partnership with a $676 million dollar company is going to double the price.  $40 billion plus $676 million = $40.676 billion if you include the full market cap of that company.  IT DOESN'T ADD UP!!!  Furthermore, MoneyGram is an actual business making money right now.  Ripple is not.  It's a platform and the price is set on speculation of what it will do.  Why should it be valued 217x a different business that has been successful for a very long time?

The thing is....that is one example out of 100s.  There are people out there that think they are buying into companies that they own and hold.  No, they aren't.  They own a currency.  They have no laws protecting them.  They have no voting rights with the company.  The CEO's responsibilities are to its share and stakeholders, not to crypto holders.  In laymen's terms, take a look at the Apple Store or Google Play Store.  Star Wars is big right now.  Star Wars:  Galaxy of Heroes is one of the top 20 or so apps with revenue.  Crypto holders think they are buying into Star Wars:  Galaxy of Heroes or Electronic Arts.  No, they aren't.  They are buying Gems, the paid currency that is used inside the game to buy loot-boxes, characters, etc.  What happens if Electronic Arts decides to add a new "pay-to-win" coin and Gems become easily handed out?  What happens if EA shuts down Galaxy of Heroes b/c they launch Galaxy of Heroes 2?  Gems, even with the platform they are on being extremely successful, could lose all their value at any moment.  With most crypto, however, we don't know yet if they are going to be successful.  It's mostly all based on speculation.

At the end of the day, there will be a very small number of block-chain platforms that are very successful.  I'd love to buy stock in some of those platforms.  Vechain would be my number 1 holding if I was still in crypto.  I'm not, however.  Should Vechain offer shares of their company on the stock exchange, I'd love to get involved.  There's just too much risk in crypto and the math completely makes no sense.  If you are still in crypto, good luck.  I hope this is a correction and you make a ton of money.  I will not envy anyone that makes a fortune in Crypto should it continue for a very long time.  I also will not feel bad for those that lose fortunes.  The risks are very clear at this point but its your money.  Do your own research and invest it wherever you'd like to.  Good luck.