Hi Omar,
Thanks for sharing. I am interested to find out your thoughts on whether we are in a cryptocurrencies bubble now? Here are my thoughts and DATA supporting this assumption: just think about and analyze the following facts:
At least several dozens alt coins market caps skyrocketed 300%-4000%(yes, four thousand!) recently just over last 2 months!
The beginning of sharp increase happened around middle of March of 2017 for ALL alt coins!
Yes, some alt coins sharp increase is logically justifiable. For example, Ripple XRP: http://www.cnbc.com/2017/03/01/japanese-banks-plan-to-adopt-blockchain-for-payments.html . Maybe there are couple other alt coins where this huge growth is also justifiable.
But for vast majority of other alt coins nothing has changed drastically during the last 2 months! At all! Neither in their technologies development, nor in their business development! But nevertheless, their market cap skyrocketed 300%-4000% in just 2 months!
The only explanation which comes to mind is that huge amount of new capital is coming to cryptocurrencies market. Probably these are the people/investors who have heard about the first wave of Bitcoin and Ethereum successes, and they have a FOMO (fear of missing out) now. They don't have deep understanding of cryptocurrencies space and their differences, but because of FOMO they still invest in all other alt coins hoping to hit jackpot!
Does it remind you anything? Yes, exactly, dot com bubble of 2000 looks very similar!
Therefore, I would expect some kind of significant downside price correction within next several months for the majority of alt coins. Would you agree?
Hi Alex,
Thank you very much for the detailed facts pertaining to your inquiry.
You're absolutely right that these massive increases have happened in just the last few months, and it's a big concern on my own mind about the sustainability.
To be honest, what I was trying to communicate in the video on this, was that I don't believe we are in an all-cryptocurrency market encompassing bubble.
I DO feel that many coins are heavily overvalued, and especially when it comes to these newly minted tokens created from ICOs. These ICOs are taking in millions upon millions of dollars, with only a white paper, series of Linkedin accounts, and nothing to really show for the reception of this money. I agree with Griff Green- these ICOs should have "Achievement Milestones" all built in, which would only qualify them to receive funds out of the smart contract upon accomplishment of different goals along their roadmap. The way things are currently getting funded is a recipe for many of these coin's disaster. and it'll likely take around 1 - 2 years before many people get burned...but it's possible that these coins will pump along the way, so "early adopters" may not take as much of a hit.
It's very hard to tell where things are going, simply because cryptocurrency hasn't been around even a decade. The dot-com bubble was very different from cryptocurrency in that there were a lot more people playing around with money in that particular environment, globally, than there are people holding cryptocurrency. The number of people aware, and holding cryptocurrencies, is poised to continue a sharp rise...as adoption only seems to be growing, and articles seem to be flowing.
But make no mistake, some of these coins won't get much farther, and could be considered to be in "bubble" territory. Ripple comes to mind, because of the fact that 1 billion XRP will be released every month for only 4 and a half years- somehow people think this really affects inflation, but in reality the team said they were only spending about 300million a month, so this was merely a P.R. move so that the team could sell for a bigger profit, in my honest perception. Ripple seems ready to disappoint many people, and that is one cryptocurrency I feel is in a bubble and could pop.
The best way to avoid any anxiety about a bubble is to hold coins you truly have faith in fundamentally- I know that for me Bitcoin is way undervalued, without a doubt, as I'd projected the price still higher after the last "halvening" event.
Ethereum also has worked very hard to get to where they are at, and the lead devs seem to take no breaks in their efforts to improve the EVM.
Coins like Steem make it very hard to tell- the fact that power downs happen MUCH more rapidly than during the first major bubble last year leads me to believe that this may be orders more sustainable.
The price for Steem touched around 3$, if my memory serves correctly, at that point. However, there was also a MUCH higher inflation rate for your vested Steem, and for the APR paid to Steem Dollar holders. It was an extreme outpour of money, and seemed unrealistic at the time.
However, the biggest earners on Steem now are those who likely have quite a following, due to having stuck with it for a while (versus having just been whales that bought dirt cheap, and abused their Steem Power). Steem power still plays a big role, but I'm noticing that for me (as a content producer) it matters MUCH less than it did at the outset of my introduction to Steemit.
To wrap it up, I wouldn't be holding coins I don't fundamentally believe in. Those coins have enjoyed their pumps...it's time to cash out, while the going is hot (and liquidity high enough), and hold those blue chips.
Cheers, brother- thanks so much for the opinion, and for letting me clarify my own thoughts by way of sharing them with you :)
Hi Omar,
Thanks for your detailed feedback. I definitely agree with your last statement: " I wouldn't be holding coins I don't fundamentally believe in." In my opinion, even though Ripple XRP may drop its value significantly, but its not going to disappear over night because of massive market adoption and real demand for it among bankers (if Ripple is successful). Also I have doubts about steem long time value. The reason is: where else can one use steem currency outside of steemit.com? Nowhere. I am not talking here about exchanging it for Bitcoin or fiat, but real usage. So, it could really have long term value only if steemit.com reaches huge scale, like Twitter for example. Otherwise it is doomed. You are right that smart investor should evaluate cryptocurrencies by analyzing their milestones achieved. Vast majority of crypto coins either don't have them at all, or very minor ones.
Thanks again! :)
I like your comment in IMHO I believe that many people will not want to take money out of Crypto Currency and put it back into fiat because of tax implications and inflation that is out of control. This time in history is very unique. If you had remarkable returns on your investments over the last year and wanted to cash in on your investments how would you go about doing so?
In regards to the bubble, we might see a segmented market that shifts around value from overbought and overvalued coins to underperformers with strong fundamentals.
best of luck!
-Isaac