Introduction - Living Inside A Bubble
This post was inspired by a post I read on Medium by Zach Herbert and my response to it.
Herbert was basically arguing that we are in a cryptocurrency bubble and was suggesting one possible solution to it.
His suggestion is to create a new type of metric called inflation factor:
We recommend adding a new metric called inflation factor that indicates how the market cap could be affected over the next five years by token inflation.
Inflation factor = (new supply over 5 years) / (current total supply) * 100%.
I'm not sure if his solution will work but I do think we need to consider such options.
I would love to have a discussion on this - I'm not an expert on such matters but I think it is an important thing to think about.
The recent Gnosis ICO seems to be a perfect and in my opinion cynical example of a project deliberately using the current market situation to lead to gross overvaluation and demand based on absolutely nothing more than hype and restricting the sale to 4% of the supply.
In the real world markets of stocks and shares these kind of shenanigans would be taken into account and reflected in the price.
In the crypto world it does not seem to matter.
From what I am seeing the vast majority of tokens being pumped have no long term value proposition - there is no utility.
The growth seems to be purely based on hype - a hallmark of bubbles where people keep jumping in due to fear of missing out.
Please read the the post by Zach Herbert if you have time. I have also copied the reply I posted in the thread below - unfortunately I couldn't get the formatting the same though.
My Response in the Medium Thread
The thing about bubbles is that they always burst.
Right now we are in the midst of a huge cryptocurrency bubble fueled by a number of different factors (- low growth in traditional investment areas, generally low interest rates, unstable local currencies and the sheer novelty factor to name just a few).
The wild-west nature of the blockchain world also means that the people behind a lot of these projects are really milking these circumstances in a way which makes it all worse:
The gnosis ICO was basically designed to create a price bubble and gross overvaluation.
How you can expect anything else when something is so anticipated and launched during a period of historical (or should it be hysterical) growth in the crypto world whilst only selling 4% of tokens — is beyond me.
You are either monumentally stupid or you are deliberately creating a bubble.
Neither is good.
It is extreme market manipulation either way and due to the naive nature of most cryptocurrency investors it does not appear to be being factored into the price.
People just keep buying into it — but the thing is:
Sooner or later people will realise that the emperor is naked and the correction will occur.
I’m not sure if your solution will fix this problem but it is worth trying because the bubble will collapse at some point unless measures are taken to deal with it.
One of the big problems with these bubbles (and why such suggestions will meet resistance) is that people become so intoxicated with what they see as “easy money” that they fail to see the bigger picture:
An industry wide collapse would be disastrous for everyone’s bottom line and would set blockchain progress and adoption back by at least five years if not more.
If it seems too good to be true it almost certainly is and the market will inevitably correct.
Of course this kind of advice almost always falls on deaf ears — people always think “this time will be different”.
It never is though.
People generally don’t learn from history, they just keep on repeating it.
Thank You For Reading - Have your say in the comments:
No
You would say that though ;)
I've earned millions online since 1999, with everything from the beginning of PayPal to the end of paid porn. Cryptocurrency is just getting started. Bitcoin at $10,000 and Ethereum ts $1000 is inevitable, and will happen faster than most expect.
Gnosis is definitely not a good investment, and most smart crypto investors know that. Prediction markets is a very lame idea
We are not all good traders like you though. I can't say with 100% certainty and I wouldn't even pretend to I just feel the way people are behaving suggests it but the only way to know is to wait and see.
buy and hold is the best way to flow, I trade because I have time to trade and increase my holding
That is what I am trying to do too. It is very tempting and easy to get caught up in FOMO though.
the safest bet in crypto is steem and bitcoin, that's why more than 50% of my crypto will always be in steem, sometimes I think the only reason I am in other cryptos is to use the profits to buy steem
Bad traders will lose their money and learn not to trade while good traders will earn money. There are currently no safe places to store wealth in Ethereum. It's all one big gamble. When there is a place to hold an asset and get 8% interest annually then you'll see a lot less going into high risk ICOs but right now that doesn't exist as there is no stable currency in Ethereum and no passive income sources.
Yes.
i agree, this is all just getting started. money (fiat currency) is now flowing into the whole cryptocurrency market, the marketcap is growing with every second, as a result of low interest monetary policy and low-yielding investment opportunities, and lastly the war on cash around the world.
a lot of crypto currencies will go to zero, some will prevail and explode in value. the most interesting thing is actually that not all crypto tokens are actually meant to be currencies, but to be like shares of the blockchain companies/applications. safest bets are bitcoin and ether in my eyes, especially because most other cryptos are traded on exchanges and you need bitcoin to trade. demand will stay high, and interest in the blockchain market is high.
i guess there will be a bubble at some point, but we are not even close yet.
Lolz. Come here fishy fishy
99% of the people around me laugh when I speak about criptocurrencies. There is nobody inside this new asset class. How can we live in a bubble if 99% of the people I know do not even know what is this blockchain technology about? I think you are confusing high volatility with a bubble. Of course we will see eventually a bubble, but it will be a bubble when your taxi driver tells you how good is buying bitcoin! That will be the time to jump!
I think you are mistaken. You don't need a huge number of people to make a bubble.
If it's a bubble it's only because the markets are immature and also because there is no way out of it. If you had 5000 ETH where would you put it if you wanted to make it generate a profit? Cashing out means 40% income tax.
Yes for sure - but I suspect those that are more savvy investors probably have some means to get around the regulations - particularly in non Western countries.
In non-Western countries yes, but Ethereum is very popular in Western countries.
It's popular everywhere now. I think if there was some big crisis the base ether token itself will likely be safe.
Right, but here I see involved in this "bubble" a little percentage of the world population, and I think thats too low having in mind that this technology is going to change almost ALL world population lifes.
Yes long term it will. Long term is irrelevant in bubbles. Look at historical examples like the dotcom bubble. The internet didn't go away - it still conquered the world but when the bubble burst times did become very tough and it delayed progress.
The bubble seems to be caused by over regulation, high cash out taxes, and lack of proof of stake or low risk interest sources. In other words an immature over regulated over taxed market is in a bubble because it's immature, over regulated and over taxed.
If the taxes weren't so high there wouldn't be so much difficulty in cashing out and there wouldn't be a bubble. But when taxes are 40% (income taxes) then you're stuck in Ethereum if you have a lot of Ethereum wealth unless you hold for 2 years straight for the capital gains rate.
Holding doesn't increase your wealth or generate any income. In fact if you just hold you lose wealth guaranteed due to Ethereum inflation which encourages people to put it into ICOs in the first place. Only proof of stake combined with tax exemption will fix this problem in my opinion.
If you compare with Internet adoption I think we are currently in 1993-1994. I repeat: still far far away from the bubble peak of 2000.
We will see. The psychology is what makes the bubble I think.
I don't think any of us believe we are nearing the point of saturated adoption. However as @thecryptofiend is saying, a bubble can be formed by a very small group. Look how shook bitcoin was with the whole Mt. Gox incident or the DAPP disaster with Eth? These were just external crisis driving price down.
Imagine what happens when a bunch of these token projects collapse into the vaporware that they are? It's going to take a while to recover major losses and it's also going to slow crypto and blockchain adoption.
But those events you are talking about are not bubble events my friend! That is just volatility. Normal and beautiful volatility that this kind of brand new assets provides. Those events were high volatility ones and provided wonderful buying opportunities. Of course we will see more 40%-60% drawdown, but they are only that: drawdowns that provide huge buying opportunities. The bubble burst will come but it is far far away...
I would define them as bubbles. I think you have a mistaken view of what a bubble is. This Wikipedia definition is talking about stocks but the principles are the same for anything:
In this case I would say for many of these tokens the financial price is way out of kilter with their utility value or indeed the amount of completed product behind them. They are often little more than a fancy website and an idea.
I think the hallmarks for me are overvaluation of a particular asset which becomes exaggerated as a result of human psychology and group behaviour.
It is not the same as volatility although volatility may be involved.
I have been prone to it myself and it is an intoxicating mix which tends to blind people to rational thought.
Interesting. And how about STEEM? Is STEEM in a bubble too? Would you recomend selling some STEEM and buy them after the "bubble" burst?
You completely miss my point - Steem is one of the few cryptocurrencies that has utility so is probably one of the safer ones - it is definitely not currently in a bubble. Last July is a different matter though.
I agree with you. There are few safe cryptos out there, and one of them is STEEM.
I get what you mean here. For example if you had a token that represented the total index of the market, you probably are fine continuing to buy in and use things like dollar cost averaging. But the token market is its own animal and I think we can say there is a bubble going on there.
The vast majority of tokens are trash over there and will end 0: YES.
There will be huge volatility events with 50% more drawdowns: YES.
Using mean reversion algorithms prices are quite overvalued right now: YES.
There is a bubble and prices will be dropping for at least 4 months or more: NO.
Either it's a bubble or the world is finally waking up to crypto. I'm not sure which one is true.
A combination of both. But I think the bubble is caused by over regulation, combined with immature markets.
If you were an early Ethereum holder who bought in during the crowdsale, and now you have 5000 ETH, what would you do with it? Suppose you bought in 12 months ago, what would you do with it then? In the first case you can possibly cash out the 5000 ETH and get capital gains tax rates but in the second cash you could be paying income tax rates of 40%. So just the tax situation DISCOURAGES people from spending their ETH any more than is necessary for survival. This basically locks it up with no way out for large holders. Thank the IRS.
And this locking up of wealth inside the system will make the ICO really the only thing you can do with ETH at this time. You cannot live off ETH, if you cash out you get a penalty, if you just sit and hold ETH you risk the price going down and not having the wealth because it's volatile and because it's inflating.
Solutions could be having assets which pay dividends like Peerplays. When you have more variety of assets then maybe people wont rush to crowdsales. Also a stable token such as the Ethereum dollar will allow people with ETH wealth to store their wealth safely which will reduce the desire to keep putting it into ICOs. But when it's all volatile then the ICO is not necessarily going to look as risky as it would look if you could get 8% or 10% interest just from the Steem Dollar for instance.
Three solutions we should push for as it's in everyone's interest:
In the absence of stability, productive assets, and with excessive penalties for spending, is it really a shock that people don't really want to do anything but put it into ICOs? Especially people who got it by mining or by the Ethereum ICO? If you got a million dollars from an ICO you might be tempted to put some portion of that into another ICO.
It could be both - I hope I am wrong though. The thing is a bubble will delay things but it will not kill the idea of crypto/blockchain. The current fiat money and banking system is broken and that is not going to change.
Yes, I agree. Could be both.
If inflation shall be build into Crypto, I don't know. Fact is that crypto is on its own island. Fact is this island doesn't have solid connections/bridges with the 'normal' world. For me it is clear, strong, solid and wide bridges shall be build with the 'normal' world to allow for crypto to grow exponentially and to give it a real value. To give crypto real value and stability, it shall be integrated with the 'normal' world commercial businesses.
Earlier today I wrote a post about this topic https://steemit.com/steemit/@edje/question-who-owns-the-steem-blockchain-and-steemit-service-and-api-s-the-steemit-steem-business-opportunity
This is exactly the problem and you highlight it. Crypto is an island with no easy way in or out. If we want to change this, push for a reduction of taxes or exemption of taxes and then watch how fast people cash out into fiat. As it is right now though, there is no certainty in crypto and no easy way out of it even if it is a bubble.
Even if you have Bitcoin, if you spend it what are the tax implications for buying a pizza?
In NL at the moment no tax implications when using BTC or other altcoin.
Consider yourselves very fortunate that you aren't a US citizen then. Our tax structure is one of the most complicated and regressive in my opinion.
Ours in NL is also not that simple, but any complex tax system gives opportunities to establish a new business. I always look it from that point, the opportunities :)
This would be fine but the US IRS hasn't been very clear on what they want.
When US IRS is clear about it, would this not give the opportunity to automate this in the financial processing? An opportunity for an online accounting software for crypto currencies?
Cryptos need to start including commercial business using their coin. Specific type of businesses shall be targeted (through direct sales; not through mass market marketing) and the required technology and everything they require for them to onboard, shall be arranged. That is a way out IMHO.
The issue again is regulation. Even if commercial businesses accept or use the coin the regulations involved make it hard for holders of the coin to spend it particularly when the price has gone up. So the higher the price goes up, the less people want to spend because of taxes, and the corporations don't want to hold coins due to legal or regulatory risks, so how do you fix it so this changes?
Not all countries regulated virtual currencies yet, so run the operation from countries without regulations. Like in NL, no regulations around BTC and altcoins. In Germany some regulations around BTC, but not to difficult. I can even imagine the part that will work with the brands to be onboarded will be support in technical integration, process integration and may even get a service to handle the regulators and taxes for them wrt the altcoins. I truly believe propositions can be made that will attract the first innovative brands to eg Steemit. So far, none of the altcoins is creating these propositions. I would love to create and execute them, and now I'm in the process of finding out who is responsible for what and with whom I shall deal to bring eg Steemit to the next level through propositions and activities to bring brands (from small to large) to Steemit.
Spending coins could be spending it on promotion channels in Steemit. Spending could be re-distribution to the audience/followers through win games. Today Steemit is blogging service, so a marketing channel, hence 100% cost in terms of financials. On Steemit a brand can earn coins post/comments, and can burn them by promotion and/or give aways. Coins can also be used to pay a fee to be allowed to use Steemit as a channel, or at least to pay for the specific technology, features, interfaces, integration that will be different from segment to segment.
I don't think that is correct. There have to be bridges otherwise money can't flow in to it. The money come from the real world via albeit via bitcoin. These kind of arguments miss the point of what I'm saying.
Sure there are some bridges available but these are conplex and more or less only used by the 'gamblers' in the investment world. These brdiges are not providing any stability to the Crypto-world. Look at what is happening last month with the crypto values. Only jumping, 10 to 100% in short time. The bridges I talk about will give crypto stability! This to be achieved by onboarding and integrating commercial businesses from the normal world. They will demand stability, and Crypto-world will have to start creating solutions to give that stability. That bridge will be sooo much more solid then the small and complex bridges we have today into Crypto-world.
I agree but none of that has anything to do with bubbles though.
I think we are talking about different things - such bridges will ensure long term stability in crypto but they aren't going to do anything about people investing recklessly in vapourware projects.
I know because I have been one of those people in the past.
I'm not sure; Crypto-world is a complex world with little solid information and due dilligence. When Crypto-world become bigger, much bigger, more independent investiagtors and researchers will provide better guidenance in what is risky and what not. Same as in the normal world's financial sector. Crypto-world is simply to small to be relevant for such independent parties to spend time and resources to try and create risk analyses on any existing coin as well as new coins and initiatives.
Again I think you are misunderstanding me - please do some reading on historical market bubbles.
Market bubbles are everywhere. Crypto could be one of them. When not adding value such as in real services around the coins, they will at some point burst. Those who manage to create real services arround it will have a chance to survive. If those coins are currently overvalued, that is the question. I agree that when no real services are added, Crypto-land is in a bubble, since most coins do not havr any value ie services that make use of the coin.
It has everything to do with this bubble. If there is no stability of the underlying token, and no places to get low risk interest, and no easy way to spend the token in the outside world, well what else is left?
If you have ETH one of the few things you can do for it to earn more is ICOs. You don't have the ability to buy real estate in the real world with it, or buy real shares in real companies with it. You can't really do much anything except what people are doing with the ICOs.
Cryptos are not investing time and money to get their currencies into the real world.
You don't get taxed when you flow fiat into crypto. The taxes come when crypto tries to convert back to fiat. You can buy Bitcoins from Coinbase no problem, but if you then sell Bitcoin for pizza but your Bitcoin went up in price, don't you now have to pay some sort of capital gain?
The complications involved with just spending cryptocurrencies is enough to discourage it.
In NL we do not have capital gain taxes for instance. I don't know the rules in each country, but I'm sure the rules are clear for each country. As per other comments I made to this post, when creating propositions for commercial businesses, tax advise or even service shall be part of the proposition.
Commercial business will need to be onboarded not through general marketing activities, by through person-2-person sales activities. That is why bringing the business segments onboard will cost good money due to the nature of the sales method. Obviously, a solid proposition needs to be created first :)
I do think we need to factor in inflation in our future price, but I also feel there is a good chance it is the opposite of a bubble. Cryptocurrency is very niche at the moment (try talking to anyone outside of the crypto world and see the looks you get) and the market caps are crazy, can you imagine if it goes mainstream? Yeah we can't have so many coins of value but the ones that make it can see great success.
I understand what you are saying but I would disagree and agree lol. I think the current psychology is inherently bubble like.
Sure it may not be and we will have to see.
I would also say that a bubble won't kill cryptocurrency and some of the current players will likely survive - someone gave the example of Amazon.
It is possible but I see, if it happens, maybe a medium dip with bitcoin and a lot of coins with low value drop by the waste-side. So we kind of agree. But
I don't see a crash. I see what you're saying and I don't disagree either, but I feel this tech really is revolutionary and all it needs is the numbers. To me a bubble needs to be built on a false premise with a rush of money. There is a rush of money, maybe a little too fast, but the idea behind it is solid. Blockchain is the future. And I still think there is a chance this is just the beginning, the bubble might be years off if at all. This is a currency that is, literally, worldwide with low to little fees, it has a lot of a value (but I'm not an expert, so please, if any one reads this, don't invest solely on my advice, do your research and only invest what you can lose.)
Yes of course.
Time will tell and if there is a bubble or other trouble it is wise we keep our eyes open. Thanks for discussion :)
Sure and like I said I hope I'm wrong (I am quite often) but just best to be cautious.
Thank you discussion and good discussion at that is one of the best things about Steemit:)
When it's frontpage CNN Money, that's when you realize it's a bubble, but even then it may last a few more weeks. Knowing the cryptoeconomy 5 years, a common mistake is selling too early in bubbles, but we'll see soon enough. :)
Knowing my luck I would sell too early lol!
Congratulations @thecryptofiend!
Your post was mentioned in my hit parade in the following categories:
Thank you!
I think we are about to see a massive transfer into the Crypto Currency market across the board. Bitcoin will keep gaining, but the get rich quick crowd will hit the penny and below cryptos. And when ever we see a BTC retracement we'll see more money moving into ETH and LTE and I think Ripple is going to take off also no matter how much the Crypto community hates it. Even Dogecoin is others like it are going to start increasing in price. Two years from now I doubt you'll be able to find anything trading today (in the top 100 Marketcap, that's not a total scam) for under $1 and BTC will be around $5000.
I could be wrong but let's how it plays out. It's too soon for the bubble to burst. Give it 5-7 years.
I just wish I had not missed the move from Sub .01 prices on Ripple to now it's at .09 we were talking about it right before it happen. I got in at .05 and .06
I think everyone knew Ripple would take off at some point was just a question of when but like you said it is not popular in the community.
Putting a correct economic value on any item is not a straightforward task. There are different methods, different purposes, different uses.
I agree that the current default market cap metric that is often used is flawed and the introduction of another metric to give an insight into the coins future is welcome but whatever metric is introduced will be subjective to say the least and probably not comparable across coins. What value would you use for USDT for example? Future Coin supply would be a subjective assessment of future investments in the coin.
I don't think there is a perfect method - we have a flawed system and hopefully less flawed solutions but it is something that will require review.
I'm thinking we are in a bubble! And maybe we are at the point like the internet bubble, where the few gems recovered and continue to be high flyers. I think amazon as a perfect example. I think steem will be in the $$$, but it won't happen until all the desperate give up on it.
Good points and I think some companies and projects can survive bubbles for sure. Steemit is one of the few platforms that has actual utility. There will likely be tough times for us all though, if it is a bubble and it ends up bursting.
I'm wondering if anyone remembers the bubble that happened from october 2013 to march 2014. It was in the Mt. Gox market and over the course of 5 months the price of bitcoin rose from 100 - 1300 USD. Do we see that kind of bubble here? Considering it was early on in the cryptocurrency game there are many more tokens now. But, we still have to pay heed to what happened before. http://imgur.com/a/mJPab Looks like a bubble. A 1200% rise in the price of an asset, that holds for a period of time...(the price of btcmtgox didn't fall until after feburary 2014).
Now I know the counter arguments to this, saying that there were currency manipulators playing in the mtgox market, and that the Chinese played a large part in this huge price jump in trying to move dirty money out of China. BUT! It is a market! People will do what they will in a market, and utilize the resources that they have at their disposal, just because you see examples like gnosis, you can't rule that the whole gammit of cryptocurrencies is experiencing a bubble. I'm bullish.
Skrt
Far far from the point of the Internet bubble. When we start seeing billions tossed around in smart contracts which are all hype then we are in something like the Internet bubble. We are seeing 10 million here, 12 million there. And we will continue seeing this because there is massive wealth from Ethereum crowdsale token holders and miners and no where to put it.
Is there a stable Ethereum Dollar yet? No. Is there any token in Ethereum which is considered safe and which pays out a dividend? No? Then the only thing a holder can do when the price goes up is put it into an ICO and try to get even more to beat inflation of Ethers. Only a mature market will provide enough options so that this changes.
And getting in and out of fiat also is not free. When you want to cash out, and if you do so without waiting for 2 years, you get to pay 40% in income taxes. So a lot of ICO token holders and Ethereum crowdsale holders can literally do nothing better than to sit on their stashes for 2 years.
Result? The wealth is trapped with no where safe to go except into ICOs. Call it a bubble but there is no way to pop it and it's far from the stage where it can be. Maybe proof of stake will settle it all down though as holding ETH will give a premium while today it gives a penalty. Cashing out into fiat still give give a penalty though so maybe people complaining about this bubble should be pushing to change the laws so cryptocurrency is tax exempt. I expect if you did that then you'd see billions of dollars cashed out and no more ICO bubbles.
Personally, I'm in a bacta tank
Are we in a bubble? Yes.
I'm sure there will be corrections, but I think we ain't seen nothing yet. It will not surprice me if we will see Bitcoin at $15.000 within 2 years.
How about 15K in 2017?
It sure did eh! :-)
Hope so but it is likely there will be setbacks along the way. I think long term may be 20 or 30 years even $1m is possible.
Great article, especially for newbies. Its important to know that bubbles exist and that we could be in one right now.
How I try to stay out of bubbles:
Choose coins with actual use cases and great team, limited supply, maybe deflationary.
Yes I think that is good plan - there is no 100% protection and all investments are risky (not just crypto) but that is the best we can do I think.
I sincerely do not think that this is a bubble. First of all, one key aspect of a bubble is herd effect with majority of the population within the ecosystem of the bubble.
In this case, Crytocurrency ecosystem is the entire world economy and the present cryptomarket is just about 1 percent of the whole world economy.
However, I agree with you that some coins with no real value are being pumped and used to scam unaware investors and I can tell you that over time, that will self-correct.
The real coins with value will continue to do well! Bitcoin, Ripples, Golem, Etherum/Etherum Classic, Litecoin, Monero, Dash, Steem, Maidsafe, NEM, Pivx and many more coins with value will continue to develop and increase in value.
Remember that the total market capitalization for cryptomarket is just about a paltry 40billion USD.
The price increase is just starting. Once in a while, there will be correction that wont last but will see shit coins without values messed up. Coins with worth and value will take up the funds divested from such shit coin, and then continue to grow in value.
THIS IS MY OPINION
Hope you are right.
Lol I hope so too
If this is true, then a way to invest would be to buy all of the top hundred and cash into all of them with equal amounts. As you said, what you lose by investing into a scam coin will flow into one of your good coins in the end anyways.
Perfect idea.
We are in a bubble for sure. There is so much dumb money pouring into projects that only very few in this space even understand well. People will realize the emperor is naked. The problem right now is all these dumb money investments are doing really well. Investors haven't realized there is no code behind their million dollar investment. It will happen soon and when it does, investors will become much more conservative. It is just like the .com bubble, people see a new ICO, they just have to invest. That is the type of investor mindset that makes a bubble.
Check out my post "Crypto Markets Are Exploding! Can the Market Keep Up? - Revisiting: A Note of Consensus in this Time of Cryptocurrency Chaos", I discuss a the Gnosis ICO and warn people to beware of all these new coins that just pop up on coinmarketcap.
That is my thinking too. The problem is when you are in the height of a bubble the people on the inside can rarely see it.
There was a mini-bubble of sorts in 2014 and people didn't see it coming then then.
When people are making money a lot of money they get something akin to the gamblers high where they don't and can't see the truth.
Thanks will check out your link - Gnosis has to be one of the most brazen attempts at market manipulation ever.
Actually I'm not so sure about Gnosis. They certainly did not want to be valued so excessively - that is one of the worst things that can happen to a startup. I would argue that the auction was designed to be fair, although using a new model like they did had this consequence. All the FOMO caused everyone to pay a much higher price than an objective valuation may have. Everyone just wanted to get into the sale so "yeah sure I'd pay exorbitant amount for a GNO token, the price will go down by the end of the auction" became what everyone did. And then it sold out and the price did not go down.
I think you are being naive when you think that.
The Gnosis ICO has been anticipated for so long that no other outcome was probable - so they are either incompetent and didn't know what they were doing, or they did it deliberately. Neither is good.
It would be very ironic that people creating a prediction market could not predict such an obvious outcome!
I agree. Could not distance myself far enough from the project.
I was just trying to bring a bit of the devils advocate to the table. Full disclosure: do not and do not plan to hold any GNO, I do hold REP however.
Me too - am holding some REP long term - I was going to buy into Gnosis too but when I realised the way the ICO worked I held off because it seemed scammy to me but it sold out faster than even I expected it to. Lucky it did because I tend to be susceptible to last minute FOMO - I think I must have the gambling gene lol!
Haha TBH I had to mentally tell myself that I would not get in the first day. I thought that the project was worth just a few million at most. The part of FOMO that gets us is that we are all susceptible. I think holding REP long term will be a very interesting prospect.
So where are the so called "smart money" investments? I mean if you're in ETH at all the majority of real investors will consider it a high risk otherwise known as "dumb" investment. So basically what mainstream investors are involved to begin with in crypto? VCs invest in companies, not usually in tokens.
Don't get me wrong, a lot of smart contracts are perhaps over priced, but where else can the ETH go and what else can it be used for right now? Where are the lower risk "smart" or "safe" investments you speak of?
That is not for me to decide. As someone very involved in this space, I have made my assessments as to what projects are promising.
I am a real investor. There is plenty of interest from large VCs in blockchain tech. They just tend to be more conservative with their funds. Anderseen is quite keen on blockchain so are many others.
Well most people misunderstand the purpose of ETH. It is a base protocol incentive token. Basically it is the gas for the Ethereum blockchain. Investors of ETH are confident in the future usecases for the ETH blockchain. I am not going to point you in any direction for a "safe" or "smart" investment. That needs top be for you to decide objectively.
I will simply list a few projects that I think are interesting. I will not detail my actual holdings.
Just to name a few. As some of these haven't shown any working code, they could be entirely scams.
Right and I'm aware of those projects but all are vulnerable to regulatory risk. Ethereum itself is vulnerable to regulatory risk. So that is what I mean.
Even if a project isn't a scam, and everyone building it is competent, it doesn't mean it will work out well. Tokencard for example, probably isn't a scam, and they probably are competent enough to pull it off, but will it be legal?
Anyone involved in cryptocurrency is operating in the grey. They won't even let an ETF get SEC approval.
I'm fully aware of that but it doesn't change the fact that someone with 5000 ETH isn't ever going to spend it all on gas. And when that 5000 ETH is worth a million dollars what can they do with it besides choose their ICOs?
I argue that regulation is not much of an issue. It is either allow the internet or not. Period.
Not having crypto is the least of the problems when there is no internet. Sure they could try to regulate Bitcoin but the entire point of the bitcoin protocol is to resist that very regulation. If you look at countries like Japan legalizing these cryptos, the smart places will allow their economies to thrive.
The entire point of this space is an indifference to legality. That is for consensus to decide.
The ETF is a much more complex issue than I care to detail but there are many forces acting against. I'm fairly certain one will come along in due time.
Sure, no one is spending thousands of ether on gas. That completely misses the point of a protocol incentive token. The locked ether as stake, the value of the underlying contract execution is entirely based on the value of ether. If you see ETH as simply a vehicle for ICOs I believe you are mistaken. Ether is a vital incentive structure within the protocol that will run many economies on the layer above.
Well also when 5000 ETH is work millions, you could just sell it for millions.
Care to elaborate what you mean by this?
I wouldn't go that far as that might be politically correct but not necessarily accurate. I would say the legal risks are real and the whole point in rational economic behavior would be to get the most reward with the least risk. I admit it's not as high of a risk as some people think but it's not a situation of zero risk either, so we cannot act as if laws don't matter.
Do we really want an ETF though?
I agree with this. Ethereum will be able to do much more than ICOs eventually.
And also pay millions in taxes. It is not obvious where to cash out or what the tax situation is. The IRS with Coinbase has made it very difficult to determine the tax risks. For small amounts of money it might not be much risk but if you're talking millions you will have to hire a lawyer possibly.
What is your answer to this?
No.
I hope you are right but the current atmosphere makes me feel like it is.
I think we are just seeing a market correction (from extreme undervaluation) due to the emergence of many of these technologies finally making progress.
Perhaps in certain situations for example ethereum makes sense. On the other hand tokens like Gnosis don't.
True. But I don't see a bubble because I am not holding useless/no utility coins. I believe that there is no bubble, maybe just overvaluation. I think 2018 will sort things out. 2017 is just the beginning of the rockets launching and has caused excitement.
I hope so!
Reading and learning! Thanks
I have a hard time buying that crytpo is in a bubble when, in my own experience, 9 out of 10 people have never heard of bitcoin.
We may have a "mini-bubble" within this currently niche market, but the real bubble, the one that may take bitcoin into the hundreds of billions or even trillions ($) market cap, hasn't even really started. Whether or not this niche bubble (the nerd, geeks and fringe market speculators who're currently propping up the crypto markets) pops before the real one sets in, your guess is as good as mine. Either way, I'm convinced that the big daddy bubble hasn't even started yet, yet alone nearing the pop.
It's when 9 or 10 out of 10 people know about bitcoin and 7 out of 10 are selling their houses to buy it up that we're in the real bubble, IMO.
Perhaps.
Interesting @thecryptofiend something I need to look more into and worth a discussion thanks for sharing.
You're welcome.
I don't think we are in a bubble. I actually don't believe in bubbles. With everything there is volatility. Not a single person can argue against the superiority of blockchain in regards to the current solutions. It's just superior in every way. Cryptocurrencies simply ride the wave of innovation and hope to drive enough capital to build companies that offer real solutions. Sure 99% of cryptocurrencies are vaporware but one needs just a bit of research and can invest wisely. Pick 10 and Hodl. This is an investment that is going to pay out in a decade. not today with the FIAT hurdles.
if you try to trade you will get REKT right now because a handful of people control everything. Avoid being the 99% "get rich fast" group. I never traded nor I ever plan to do so. I read a couple of finance books and plenty of research. Even a monkey can beat the market by just HODLing.
I see what you are saying but just because you don't believe in bubbles is irrelevant to whether they exist or not ;)
Really? Cute cat and dog? I also have an uneasy feeling about crypto prices. How is it possible that I tripled my holdings in three months on doing practically nothing. I hope that BTC won't plummet but nothing seems to point to that. I remember reading that the price of BTC now grows 'organically'. Whatever that means.
Well rapid growth can lead to bubbles but as I said I am not an expert. I read a book on the 1990s Beany Baby Bubble - surprisingly good read - but there were a lot of similarities there.
More I think of it more it worries me. Linked your thoughts to my new post.
Cool thanks I will check it out. I hope I am just being overly anxious and I don't want to give those Wallstreet types who laugh at Bitcoin and crypto to have chance to say "I told you so" - even though I don't think anything will completely kill crypto it would be demoralising.
Bitcoin will stop rising so fast soon, and then crypto coins will flourish. IMO
It seems to happen in waves. First BTC goes up and most alts go down (in BTC terms), then that money feeds into alts afterwards.
Industry wide collapse is not likely to happen. The reason for these bubbles is the markets are immature and there isn't a lot of places to store wealth. Once Ethereum moves to proof of stake and a greater variety of crypto-assets exist then you won't be able to make millions on hype alone.
But when there are millions of ETH sitting with no where to go then the wealth flows where it can grow.
I hope you are right.
You're dead on here. I think the other issue is many folks who find crypto tend to be skewed toward having less experience in general with investing fundamentals. Don't get me wrong I love the community and it's core values of pushing back against traditional financial and economic systems, but the current crypto climate is like the late 90's internet bubble on steroids. The internet companies usually had a product or service at least that was already working. Yes, many were not profitable and had limited pathways to profitability, but they had a product.
In crypto, people are buying only on concept, this is reckless and beyond just "speculating" it's hysteria. There needs to be something more than a whitepaper, there has to be some tech already built and at least some type of existing asset. Gnosis just screams irrational, especially with Augur already in the market.
Thanks - I think we are very much on the same wavelength.
The massive valuations for things that are little more than an idea (and often not a new one at that) is characteristic of the dotcom bubble.
I think when there is a lot of market exuberance it creates a kind of hysteria where people are afraid of missing out on the next big thing.
This causes people to lose their judgment and it is one of the things that creates bubbles.
I'm with you though that this seems beyond. I think the stories of bitcoin millionaires starting out by buying $100 worth of coins really extends the narrative. Nevermind the current 1st quarter rise of coins/tokens in general. I'm probably in the minority, but I think bitcoin itself is way over-valued. It has minimal utility compared to other blockchain tech at this point. To my eye it just has first mover advantage left.
Other coins are cheaper and faster for financial transacting. Newer coins offer better anonymity. I'm not sure where it shines except that it has a bigger user base and therefore larger group of traders.
Given all the animosity between different camps in the Bitcoin community I am starting to thing that Bitcoin is overvalued for what it is.
Every time I send bitcoin it feels so slow compared to everything else - particularly Steem, but even things like ether wipe the floor with it in this regard.
In its current form it is too slow to ever go mainstream (at least for payments).
What if the US Federal Reserve note is overvalued?
It likely is, however that still doesn't call for leveraging your liquid FIAT assets by tossing them into a nebulous crypto token with little or no basis.
Exactly it simply swapping one overvalued asset for another.
It's not even that. There are less options. Ethereum isn't a mature financial ecosystem where there are any safe investments or low risk choices. It's all risky! The people involved are involved because they took the risk. The people who made the most money took the most risk. So how can you be shocked if there is more risk taking when risk taking is the only thing offered by Ethereum?
Even Digix is risky.
Yep, true enough, It's all a big risk, however there are somewhat calculated risks and there is wild, pull-out-of-your-ass-and-throw-darts risks. This feels like the latter.
Yes I agree and I try to avoid the obvious scams and bad decisions. The truth is even smart decisions can end up with bad consequences because you cannot predict the moves of the regulators, or the bad actors.
If the cryptocurrency world is in a bubble, then what the hell do we call the fiat markets? Cryptos are just getting warmed up.
That is exactly the kind of thing people in bubbles say.
Sure - we may be in a crypto bubble - but it's all relative is my main point. If bitcoin crashed money would just run to other cryptos like Etherum etc. Maybe a little into the metals.
It certainly wouldn't run to the stock market or most fiat currencies, considering we are seeing signs of stress and the beginning of a currency crisis.
Some people may not like Silver or Bitcoin but good luck finding a good better alternative!
Yes that is true. I think it would likely end up in Bitcoin.
That is exactly what I've said. The wealth has no exit, thus no where to go once it's trapped in crypto. And there are good stocks, and safer assets, but getting into them from crypto requires hiring an accountant.
Might be possible, but I guess Crypto will be the future - no matter if it is run by states or free people;)
Yes it is the future but that is unrelated to if we are in a bubble or not right now. The dotcom bubble did not stop the internet from being the future but it did slow things down and make things pretty grim for a few years.
True. Always remember not put the bet on one horse;)
Yes:)
There are definetely some currencies overpumpeds.
My point of view as a trader can bw summarized in 2 sentences: never get married with one of those and if you want to risk and try to get some benefit, don't forget about "Stop Losses".
Yes good points.
This time it is different. We never had blockchain tech before. Value is relative since the US Federal Reserve note is just another virtual currency.
Value is still based on human psychology. You can't put that on a blockchain - at least not yet!
Very true. One grand illusion...:)
And FIAT currencies are backed by armies...we can't forget that either...lol
We better start lobbying for a government bailout!!!
Lol yes!
BUY FIAT!
;O)
Lol buy Zim Dollars!
OMG I heard they are undervalued! Quick. All in!
Good post.
I'll just put here the last video of Andreas because this post and comments are almost around the subject discussed here
Blockchain Vs. Bullshit.
This message is very important for the future of the blockchain as a liberating realizable Utopia.
Thanks I love Andreas and I haven't watched this video yet, but I will just say that Andreas is the exact kind of true believer who would be blind to a bubble approaching.
Maybe it is FIAT that is in the bubble
That makes no sense - I think what you mean is that the future of fiat is limited and I would agree on that but it is a separate matter.
I mean FIAT is always in a bubble and they will always go to their intrinsic value of zero. Crypto may stablise and be used as a real measurement of wealth, rather than the increasing FIAT prices of houses etc
OK I think I understand - the central banks create a sort of bubble by overprinting money when they feel like it. That is one of the reasons why even if it is a bubble (and eventually bursts) it will not kill crypto - just slow it down.
That's what I'm hoping, or for crypto to FIAT ratios to go to the moons of Neptune :)
Great comment.
In my opinion : blockchain technology is just a tool. The main question is if we will use it or not in our allday life to replace banknote. Actually the blockchain works slow (it needs now a few more hours to make a BTC transfer)...the crypto which everyone in the world can use is still not born. Also there is the problem of Energy : if everybody in the world start to use Bitcoin for buying and selling goods we will need the electricity of a country to make the computer calculation. But, it is definitely the future, I trade a lot in the world since 15 years, how many time I had to check with my bank and ask them why the money I was waiting from my customer in the USA didn't hit my account, or my supplier in China still didn't received my TT wire after 15 days. The most frustrating is that the employee from the bank said everytime that there was probably a mistake from my side, before they admit 15 days later that they made a mistake, of course without any apologizes....it is everytime the fault of the computer...
This kind of situation cannot happen with blockchain technology, I can make my transfer 24hours per day (don't need to wait monday morning the bank is open), and I can trace my payment through the blockchain (I have a proof which I have not with my bank -- nothing to compare with a TT Copy which is just a piece of shit)....I am in France, when I make a bank transfer in USD to China for 1000 USD, my supplier in China will receive only 950 or 975 USD, Why ? because the wire must be made by a bank of the state who owns the currency : in other words my USD wire from Paris to Hong Kong will transit through a US Bank : that means +2days. There is not this kind of problem with Bitcoin. My supplier in China can receive the bitcoin quasi instantly and can arrange the shipment the same day : in some case, especially on thursday or friday, I can save 4 to 5 days...this is very important for me when I am short on cash. Imagine now if I could tomorrow trade with African people : they need so much things....they have money....but it is so complicate for them to go to the next main town to make a TT transfer...it is expensive, and they have to wait so long ! I am one of those who hope that blockchain will be the next standard for "money" transfer, because it is the way of transparence and prosperity and especially for the so called third country.
Good points but I don't think they apply to a bubble. Bubbles are created by the way people behave and their combined psychology - I don't think any of us doubt the long term viability and survival of these technologies but that has nothing to do with whether there is a bubble or not.
Thanks for your fast reply....I am agree with you my points don't direct apply to the question bubble or not...it was my emotional reply.... It was interesting to see the quick rise of Ripple 1 month ago from 1 to 2 Billion within 24 hours just after the annonce on CNN, and next day back to 1 Billion. I thought it is finished for ripple....but now it comes back to 2 billion.. I guess it is actually more easy for investors to enter in crypto through Ripple, LTC Dash (well all crypto you can buy direct in USD EUR or JPY...) and then to exchange them against BTC. For the question of bubble or not, I think it is more a question of capitalization : at a certain level (I would say 500 billions) it will be difficult to go back. A few days ago I spoke by phone with a employee from Stellar Lumens working in Nigeria : his job consist to sell STR against cash to companies in this country so they can trade more easy. In south America also more and more people start to use cryptos like normal bank transfer
Don't worry I understand the point you were making.
It is interesting I found myself thinking of a crypto-currency bubble recently too. I think I may have even mentioned it in my post on fragmentation over a week ago. Everyone and their grandmother rushing to create a new shit coin, and/or a new blockchain rather than supporting the ones that already exist and work really well. It does resemble the dot.com bubble quite a bit.
Yes!
Great post...
One of the ICOs I'm following is Exscudo, where I'm part of the "bounty program." I honestly am not sure my shares will amount to much of anything - they're selling so many shares, and they haven't exactly set the world on fire, and the ICO is running for way too long.
But it's their world, right?
The bubble is likely, but it's also going to separate wheat from chaff - there will be a shakedown and Yahoo-type businesses will survive, and Go2Net will go belly up.
Yes it is one way of looking at it :)
I just wrote a post about my own view on the whole bubble thing. My point is very simple, if each one of us do not make their part, we can ruin the party. If we get enough bad examples out on the street we'll sure piss off a bunch of regulators and traditional investors, and that will likely limit the whole of crypto and blockchain economy's growth.
Yes I think that is correct.
saying cryptocurrency is in a bubble is like saying the internet is a bubble.
This is just the beginning
Bitcoin 1M
eth £5000
steem £500
No it's not. The internet was in a bubble 20 years ago.
i'm talking about the usage of the internet are you thinking about the .com bubble?
Obviously.
Well that's not really the internet is it? Have you ever heard of the saying, 'if you have nothing nice to say, say nothing at all'?
People like you spreading negativity is depressing
Lol you have no idea what you are talking about. Sorry if the real world is too depressing for you. Go back to sleep and dream of unicorns.
I do feel sorry for you, can honestly say I've never dream of unicorns but would be nice
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Here is an update on the crypto-bubble situation and how it compares to the Real Estate bubble collapse...
https://steemit.com/cryptocurrency/@harpooninvestor/the-great-currency-bubble-is-ending-what-will-we-see-from-here-on
Interesting article. I was about to start a similair discussion. The biggest group of uneducated investors in mankind has to define the trustworthyness and price of a crypto. It's an interesting world we live in. This is quite an interesting website I found: https://www.coincheckup.com. They researched and analyzed every tradable coin out there.