Why most crypto investors don't understand cryptos.
I'm basing the following on reading articles written by so called "investor experts" or the fact that Chainlink, for instance, is coupled to Bitcoin performance.
Mistakes in Crypto Investing:
1) A high percentage of crypto traders, first of all, don't understand "crypto technology". For example:
- Multiple interoperating decentralized oracle networks (DONs)
- Oracles and nodes
- Trust-minimized off-chain computation
- Cross-Chain Interoperability Protocol (CCIP)
- Infrastructure ecosystem, CI/CD, and product optimization
- Refactoring data pipelines in cloud environments
- Kubernetes clusters
- Chainlink Keepers
- Verifiable source of randomness for smart contract developers
- etc.
To be a good investor in cryptos, you need to understand how they work and what makes their value...just like investing in art, cars, real estate, etc.
2) It's a huge mistake to speculate price forecasts using the same methods as stocks.
Financial fundamentals (Income Statements and Balance Sheets), as well as key statistics and market factors are what should be included in analyzing stocks.
None of these apply to Chainlink.
3) Investors erroneously assume Link's price movement should/will be coupled with BTC's price movement. As a result, because so many investors believe that all cryptos prices are relative to BTC, prices do actually correlate to BTC for the most part.
This is another huge mistake for an investor.
Bitcoin's price is basically based on an intrinsic value. It's not based on it's actual use case solutions, technology or number of active bitcoin accounts (wallets).
Chainlink's price, on the other hand, should (and will eventually) be based on AAD; the active addresses derivative. Also known as Metcalfe's Law.
Chainlink is a blockchain and smart contract communications network. The value of a communications network is proportional to the square of the number of its users. It's not an intrinsic value.
The growth of a communications network will follow Metcalfe's law; growing exponentially, not based on intrinsic value or BTC price.
Summary:
The next time you see "experts" predicting Link's price based on Bitcoin's, or based on the methods used to forecast stock prices, be aware....that's not an "expert" on crypto investments.
