We are witnessing a lot of hype burst cycles in the crypto market. A certain coin or token is starting to attract attention, and its price rises rapidly with the help of the incentives given. If there is a story about the project that excites people, the rise continues for a long time. There comes a time when some investors begin to think that the uptrend will last forever. When the decline begins, some investors claim that it is temporary and that things will improve. However, panic soon begins and prices fall far below the point that the project deserves. If the creators of the project have good intentions, the wheels keep turning.
I stepped into the crypto world at the end of 2017. The price of Steem was near the peak at the time of my purchase. Incentives were pretty high on Steem. So much so that after one month I started to think about buying a villa for my family :) A few months later, the value of my investment fell to one-tenth, in accordance with the phrase "Never invest money that you can't afford to lose". Adults shouldn't be complaining about such things. At least I've been acquainted with the crypto market.
It is often questioned how much of a project's price comes from incentives or price momentum and how much from the utility. I think the ability to create hype is an element of value in itself. Because the value created in a growing network increases exponentially, growth brings value creation by itself. Growth also leads to a rapid increase in brand value and lower unit costs. In an environment where open source code is used, non-original projects can thus have a chance to survive. Meme coins and Uniswap imitation DEFI applications can be considered in this context.
Certain conditions must be met for the hype created around a project to turn into a sustainable system. The token economy, which I frequently refer to, has a key position in this regard. The prosperity created through high inflation or high debt is often not sustainable. The fair distribution of coins to investors is also an important issue. If a lot of value has leaked out of the system through excessive incentives during periods of rapid growth, it is more difficult to emerge from the stagnation when the wind that fills the sails is cut.
Keeping some of the funds held during the hype as reserves and using some funds to create brand value can serve sustainability.
Conclusion
The main idea: Hype burst cycles can be used to create value.
If the funds directed to the network are well managed, the system can come out of the hype cycle stronger. The reserves accumulated during the hype period will make a significant contribution to sustainability.
It is not so easy to distinguish what creates value and what does not. Sometimes excessive pricing can lead to the emergence of useful things. As long as those who manage resources make good faith efforts to generate value and distribute the value produced fairly.
Thank you for reading.
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