This is not a Crypto Bubble ?, this is CRYPTOHYPE.
Upon a time, there was a day when everybody who invested in ANY cryptocurrency made a buttload of money. Some even tripled their investment in a few hours. While others were pouring money into anything they could get their hands on, hoping they will hit the next $MAGIC crypto that will make them rich over night.
e were also some party-? Who called it a bubble, because they got a bit burned in the early 2000’s. But nobody cared, and the craze went on and on and on..
On a more serious note, lately, I have read a lot of articles written by some really savvy investors who claim we are now in a ‘Crypto Bubble.’ While I do agree with many of the arguments being raised, I think this is not a Crypto Bubble (yet), this is CRYPTOHYPE.
First, let me explain the difference between a bubble and hype on the following example; in the dot-com bubble, there was a company called Internet Capital Group which had $70M in revenue, $150M in net losses, and peaked at a $56 billion market cap. While the total market capitalization of all cryptocurrencies is now at $87 billion (‘only’ 1.5x of Internet Capital Group). Moreover, the combined values of stocks in March 2000 on the NASDAQ was at $6.71 trillion; the crash began March 11. By April, the NASDAQ was valued at $5.78 trillion [-$1 TRILLION, in a month].market Cap of All Cryptocurrencies (Source)
Now, it’s good to mention that the total market cap of all cryptocurrencies has quadrupled since January. However, I believe we are still in the hype-phase. By that, I mean that it will take a while before we get from billions to trillions. But I also do acknowledge that this statement might be horribly wrong in hindsight. Especially, taking into account the current trade volumes and hype surrounding cryptocurrencies.
What really scares me regarding crypto?
That being said, there is a bunch of things that scare me a bit about cryptocurrencies (= could cause a ? in the long-run). Below is a list of my TOP EIGHT concerns;
1.?️ [obvious] The vast majority of crypto investments are pure speculations at this point. How else can you explain coins 10x in one day? If you don’t believe me —check the historic trade volumes of a few coins
A volume of $XEM (similar to many many other coins)
2.The current utility value to users is close to zero. How many people you know actually use blockchain protocols, opposed to how many trade crypto
3. I see projects with hardly any users, and arguably any tech, raising tens of millions. Seriously, (if you haven’t done it before) open this link, open some of the new trending coins and check their website and the team behind the project. You will be surprised
4. [Related to (3)] ? I see many people calling themselves crypto-traders without knowing what a white-paper is. If you want to amuse yourself — open Twitter and search for $XRP, $XLM, $ZEC or pretty much any trending crypto ticker. You will see impulse trading at it’s best
5. While everyone is talking and tweeting about blockchain and the newest ICOs, the signal vs. noise ratio is really extremely low. Every little announcement = immediate increase in market cap/price, while many of those announcements have the little actual impact
6. I cannot believe I would ever complain about this; but there is almost no regulation whatsoever. One might argue we are in the Cowboy Days of Crypto
7. Trading cryptocurrencies is very social driven — check Twitter, Reddit, Facebook, etc. There are many people trying to hype their own investments, but also many scammers (and I’m not even talking about all the click-bait articles). Given the extreme volatility of most of the coins, this is causing (and will continue to cause) many irrational market moves
8. [my biggest concern] Lack of Scalability. To put things into perspective — Ethereum can now handle 15 transactions per second before transactions are rejected, Bitcoin can handle 7 Ts. / second. Founder of Ethereum, Vitalik Buterin claims he has found the ultimate solution to the problem of scalability(lightning networks and sharding). However, there is no real solution in place yet. (More here, here, or here)
can’t and won’t give you any investment tips, but I would like to share my two cents on investing in cryptocurrencies;
(A) Try to assess crypto investments [almost] in the same way you would assess investing in an early stage startup. Look at the technology — who uses it now, what are the biggest use cases. Look at the team — what’s their motivation, what’s their background, and what’s their vision. Look at the market cap and trade volumes — try to understand the drivers (is it Japan / Korea, announcement, power-traders, funds, etc.)
(B) Try to form a long-term thesis. Intraday trading is shortsighted**. In the long-run, you might 100x or even 1000x your initial investment, if your assumptions are correct.
**Unless you have built a real power-tool (AI, Social Mining, Algo-trading, etc.) for intraday trading. In that case, please drop me an email immediately
And finally, my 7 (wild) predictions
By the end of 2017, there will be 10+ coins with market cap over $1 billion
We will see some big corrections for hundreds of coins by Q4 2017
(obviously) Regulation is coming. Not only regarding exchanges, but also holding and mainly issuing new coins. I’m expecting the first heated political discussions when total market cap reaches $150 billion
People (will) say ICOs will disrupt or even end venture capital. But I am convinced, we will see the same dynamics as with Crowdfunding (both Equity and Kickstarter), which goes “hand-in-hand” with VC
I’m expecting a lot of inexperienced investors will lose money on ICOs — which will further foster discussions about regulation
At the end of 2017, there will be 5–6 clear leaders (cryptocurrencies), which will either benefit from a wide use-case or enjoy backing from big institutional/corporate players
(THIS IS NOT AN INVESTMENT TIP!) Bitcoin price will continue to surge, and by the end of the year, it will pass the $4000 mark. (Also taking into account the latest developments regarding Segwit / BIP 148)
DISCLAIMER: I’m very likely wrong about many of the opinions I share above. And I urge you NOT to treat any of those predictions or opinions as investment advice (as they are just my personal views/opinions). This article is only meant to foster discussion regarding the recent developments in the crypto space, and the predictions are just a fun exercise for myself.
Thanks for reading.