The world each day is based on leveraging one way or another. Some people are underleveraged while others are overleveraged on certain things. The ability to find an equilibrium is important to succeeding long term. I would even argue that it is what makes the millionaires/billionaires separate from the $10,000 lottery players.
In 2013, the average blockchain wallet with Bitcoin had an average close to $30,000. Clearly, during this period of time there was a bubble because of the mathematics. If all of the people took $10,000 in profit at the time it would collapse the market cap. Sure enough, that’s exactly what occurred. It fell even lower in order to get to a normalized value.
So what’s Different in Ethereum?
First off, the number of blockchain wallets has continued to grow over the last few years so now each person only has to hold a little amount to get to a high market cap. Today, the leverage of users is a whole lot less than it was in 2013. The leverage is about $5,500 compared to the $30,000 per user in 2013 I was talking about. The biggest difference is that there has been a few years of time for the technology to grow its base. So now higher valuations actually make sense.
At what price does it not make sense you make ask. Well, I believe if leverage gets to $15,000 per user in less than a year we could see a god dip again. The pace in growth of users has to keep up with the market cap growth in order to validate the equation.
Potential Things to Think About
One thing to keep in mind is whether growth in users will continue at the rate it is currently. I believe this won’t be an issue because there is more understanding about the blockchain. If you were to ask someone in 2013 what the ‘blockchain’ was very few would have had an answer. Now a decent number of people atleast have heard the term before.
In the coming years, more adoption will occur and the technology will continue to get better. I mean think about AMD GPUs two years ago or however long ago. The hashing rate has increased significantly in less time (Moores Law).
In conclusion, many will shrug their shoulders on the opportunity of a lifetime. But if you dissect the facts enough you get to a good understanding of how this technology will play out.