All markets tend to run on two emotions, fear and greed. Every time each of these emotions goes beyond rationality, bad things happen. In 2017, greed was the overriding emotion in the crypto markets. No one throwing money at crypto in December 2017 was doing so based on any rational basis. It was based on nothing but greed, and the assumption that prices would keep going higher and higher.
But while the average investor was jumping into the market at a high, smart money was getting out. Peoplelike Charlie Lee were selling the market. After a year of price drops, it’s theemotion of fear that is prevalent in the market. At this point, prices have dropped so hard thatthey are becoming irrational, and just like in 2017, average investors are selling,while smart money is getting back into the market. Proof to this is the increasedinfrastructure setup, such as custody services, aimed at institutional investors.This would not be happening if there wasn’t strong demand for such services.
The differentiating factor between smart money and the average investor is that smart money looks beyond the emotional aspect of the market. They focus on the fundamental value of the underlying asset.
Applying this logic to a crypto like Zcash (ZEC)it is quite apparent that Zcash (ZEC) is heavily undervalued at its current price. Zcash (ZEC) has dropped by more than 80% since January. This massive drop in value is sentiment driven, as fear-driven investors flee the market. Zcash fundamentals are as strong as they were in 2017. In fact, they have got stronger. This has created a massive mismatch between its true value, and the prevailing price.
For context purposes, Zcash has lost a significant portion of its value, yet its adoption is growing. Zcash is the blockchain used by JP Morgan in their Quorum platform. This is a platform that aims to give the company’s institutional clients a private way to make transactions. This is a big deal, because JP Morgan is one of the largest banks in the world, and thefact that it uses Zcash is a huge validation of this crypto.
On top of that, Zcash’s privacy tech, Zn-Snarks, is so good that it is being explored by other cryptocurrencies as well. For instance, Vitalik Buterin touched on Ethereum exploring Zcash (ZEC) as a short-term scaling solution. This is a big deal and speaks volumes about the superiority of ZEC in the cryptocurrency space. This superiority makes the chances of Zcash ever going to zero extremely low.
Therefore, as sentiment drives Zcash (ZEC) prices towards irrationality, it creates a perfect buying opportunity for long-term investors. Sentiment won’t remain low forever. At some point, the market direction will change, and buyers will come back in droves. As FOMO kicks in and the market hits new highs, institutional money will be selling and average buyers will be buying, and the cycle continues. It takes a deeper understandingof how markets work, and the crypto market will always be rewarding.