The market is full of red, a common event since the start of the year. As the bloodbath in the markets continues, we start to see the divide that is ever present within cryptocurrency.
When things head south, people leave. This is the general trend within this industry. People let price dictate what they do. It is sad to see and a complete misunderstanding of what this is happening.
It is unfortunate when people claim they want wealth yet turn away from what can lead to it. This is why most do not attain what they desire financially. People do the exact opposite of what they should be doing.
There is a lot of confusion out there about wealth and money. Too many seem to confuse the terms. Money is a toll for collaboration. In other words, it is a way to generate wealth. It is not wealth itself.
This is why when countries try to simply print money, they are no wealthier. If money were truly wealth, a country could expand the money supply on its way to prosperity. Yet that never seems to work.
So what is wealth? At the end of the day, Wealth is business. This is what creates an economy. It is money that allows for business to take place. This is the tool that can generate economic expansion. When money is put to work, productivity increases.
Of course, there are many ways this happens. To start, labor is hired and offer their services in return for, you guessed it, money. Capital can also be invested in equipment, raw materials, and land in an effort in the quest for this end. It is how software is created, buildings constructed, and medical practices formed. All of this requires money.
Yet, over time, it also generates wealth. A piece of land that is cleared and has a house constructed upon it goes up in value. Businesses are built that have value, eventually being sold. New business opportunities spring up that allow people to invest, creating more value over time.
Focusing upon money is only leading one down the wrong path. When an entire population embraces this same pursuit, economic catastrophe strikes.
Wealth is generated by making something. This can be physical structures, software, movies, or performing services. Activity is at the core of wealth generation. Money is a tool in the pursuit of this return. When the sole aim of money is to make more money, things get bottlenecked.
A strong case could be made that is what our present global economy is facing. It is overly financialized. This means growth rates slow as not only does debt servicing mire productivity, too much money is locked into the financial system. The "casino" that is Wall Street has its use, yet can end up being the tail that wags the dog. Many feel we are at that point.
When too much money is in the banking and financial system, the general economy suffers a deficit. We see this globally due to all the QE that took place. This is a situation that cryptocurrency can solve.
However, here is where we run into the issue. Too many are already looking at cryptocurrency as simply another casino. This is evident in their behavior when the bear rears its head.
The bear brings out the builders. This isn't exactly accurate since the builders are always there. What the bear does is make them stand out since the money-focused ones bail. In cryptocurrency, the "moon-seekers" are cleared while the developers keep hammering away at their keyboards. Those who are truly building keep doing so. In fact, many feel the best time to build is during the bear.
If we relate this to what happens in the everyday world we will see how absurd the mindset is.
Do the employees of a public corporation, say a Tesla or an Apple, show up each day? Is their activity at work dependent upon whether the stock went up or down? While the C-level executives have their eye on it, most simply go about their jobs. They are part of the system of building the company.
What about the plumber? Or electrician? Do they show up only when the USD (or EURO) goes up? Are they depressed when the currency goes down? Unless they are a FOREX trader, they have no clue what the currency is doing.
Yet, when it comes to cryptocurrency, we are well aware of what the market is doing every second of the day. We see it within an ecosystem like Hive. When the price of the token goes down, what happens to activity? It follows the market, producing a noticeable decline.
If people are building, why do they do that? The answer is in the fact most are not building. Instead, they are engaging when money is flowing, believing that is wealth generation. It is not. A market cap that is not sustained is nothing more than just a momentary number on a screen.
For a platform or ecosystem to truly be wealthy, builders need to keep expanding the system. If we look back at many of the projects during the ICO craze, some had a lot of money thrown at them. Yet how many had any value whatsoever? Very few.
Builders are the ones who produce results. It is not an overnight process. The money seekers do not leave more value behind as opposed to when they started. Builders do. If a developer leaves a platform, his or her input still carries on.
Does that mean we can go without financing? Of course not. This is vital to all economic system. Money is a central component to production. To start, people want to get paid. In the digital world, developers cost money. So does server space, computers, and internet connections. These "costs" are really ongoing investments in the quest to build more value.
The key is the activity is ongoing, in an effort to keep generating more wealth.
When we understand this, we can see how there is a feedback loop.
Those who look to utilize money to generate wealth find they end up with more money. As the economy (crypto-economy in our case) expands, the proverbial pie gets bigger. This increases the holdings of the different parties involved. When that happens, more money is available to hire more people to further expand the economy.
Once again, as more wealth is generated, the pie grows once again, increasing the individual holdings. With more money available, even more can be hired to again expand the economy.
Rinse and repeat.
This is the inflationary nature of economic systems. As people get involved, to use a contemporary term, the network effect is implemented. More money is required to keep baseline at a level that can accommodate all the activity that is taking place.
When this feedback loop is broken, the system starts to break down and that is when economic contraction takes place. One of the big pieces that is removed is the builders. Their productivity is decreased, furthering the problem.
Which brings us back to the bear and the builders. Those who pack it in when the markets tank are only exasperating the situation. Mistaking money for wealth, instead of the tool it is, ends up reducing the amount of business taking place. This reverses the feedback loop, pushing everything on a downward cycle.
For those who are serious about cryptocurrency and building businesses, the temptation to leave when things go sour in the markets has to be resisted. It is during those times that one should step up his or her activity. After all, many are on the sidelines, leaving the field less crowded.
Crypto-economics is not much different on many levels from classical economic systems. The main reason is that we are still dealing with human tendencies. Where there is a major difference is the speed which things happen. The digital world is light years faster than the physical. Hence, things become obvious very quickly.
Whenever the bear shows up, the builders stand out. Are you one of them?
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