People love to say that crypto is all speculation. Everything is categorized as shitcoins, from network tokens moving billions to memecoins on Solana, there's a group of people who feel it's just speculative assets with no intrinsic value.
But how true is this sentiment?
Let's start by defining "speculative assets:"
A speculative asset is a high-risk investment bought with the expectation of significant short-term profit from price fluctuations rather than long-term income or fundamental value.
These assets often feature high volatility, potential for becoming worthless, and are chosen based on market trends, news, and sentiment.
In simple terms, any asset that attracts investments because people believe number will go up in the short term and potentially make them millionaires—billionaires even.
This almost never happens by the way, but it always makes for a good short-term opportunity for market makers and insiders to make a bank.
Knowing this, how much of crypto does this definition fit perfectly? All or none?
Technology, ideology or speculation
I think that the crypto assets market prices all of the above. Of course this isn't to say that it is equally priced across all assets or even that it's evenly distributed across the performance of a single asset.
There are several factors that influence what is the primary driver of an asset's price performance at any given time.
As aforementioned, speculation-driven investments usually comes from short-term expectations of profits. In the same way that people bet on memecoins on the Solana blockchain surging in price, people speculate on Bitcoin's price surge in the short-term too.
Usually this is driven by knowledge of upcoming events, like block rewards halving and sometimes just past market analysis.
This is why perpetual markets record billions in trading volumes daily. A lot of open trades there are driven by speculation.
When it comes to ideological trades, here's where Bitcoin dominates.
The primary drivers of Bitcoin's investment inflow is ideologies around scarcity and store of value. People believe that Bitcoin is hard money, the most effective inflation hedge with great growth potential.
Pricing digital assets by ideology means that investors are buying into shared ideas, values or beliefs.
The assets remain attractive so long as the ideology remains strongly shared.
When it comes to technology pricing, investors are effectively looking at products and services. Ethereum's ETH performance is directly tied to its app ecosystem because this reflects strong use of its technology solutions, which in turn brings liquidity and revenue to the chain. But just as in the case of Bitcoin, ideology and speculation are also a part of why people invest in ETH, some narratives or factors are just stronger than others.
So when people say that crypto asset markets are all speculative, they are ignorant because memecoins, which eats up most "speculation-based" trades represents only 1.41% of the crypto assets market at $34.23b valuation today.
Numbers don't lie.