If something goes up it must also come back down. Right?
Everyone agrees that cryptocurrencies are booming. The overall market cap has risen from 11 billion US dollars to a jaw dropping 460 Billion in 12 months. That is insane. Thousands of people have made serious gains since November and have grown their personal portfolio significantly. Millionaires are sprouting out regularly from the bullish market (Even some billionares). But is it too good to be true?
There have been several bubbles since 1980. First came trading cards, specifically baseball cards. Their popularity grew very quickly and as a result so did their price. For the first time people began to collect them not for their purpose but for their monetary value. As a result, the market crashed. Then came around the real estate crash. Then the DotCom crash. The internet grew exponentially from 1995-2001. Everyone could see its unlimited potential so they all rushed in. IPOs sprouted up routinely and all people wanted was to earn money. Some did. The majority did not. Too many people rushed in the market without an actual real reason to besides to make money. Following that came a series of smaller bubbles. Then finally came to the housing and real estate bubble of 2007. This caused the second worst recession in US history. I do not need to go into the history of this crash but most can agree it was bad. The point is that wealth is created one day and lost in another. Markets can be viewed as a casino. You bet your money. Sometimes you will win, potentially large sums of money. Other times you will lose.
The United States lives in a consumer culture. So it is not a surprise to me that bubbles happen so frequently. Everyone wants what is popular. They want to be part of the now. They want to earn money. But this style of thinking is what leads to serious problems down the line.
Right now there is a bubble path forming in the cryptocurrency community. As more and more publicity on the currencies are put out there the more people are flooding in. Recently I have searched forum pages and watched numerous videos about people only talking about how to earn massive "GAINS" instead of appreciating the original purpose of cryptocurrencies, which is to take power away from the banks. To get rid of the middle man. To give more power back to the people.
Now lets talk about the majority of the useless coins out there. Let say 90-95% of the coins out there are crap. They are not unique. They are just copies of original coins. They are there to earn some random person a fortune. The sad thing is people do not see this. Millions of dollars are poured into these altcoins daily. They are artificially raised in value when they bring no real value to the market.
The next red flag is with bitcoin. Bitcoin has risen from 1000 US Dollars to 17000 US Dollars in the span of a year. It has not raised in monetary value because of its large scale adoption in the economic world. People are still not using it. No one goes out there and buys a sandwich with a bitcoin (why would they when it increases so much in value). No one flies to New York with a flight ticket paid with bitcoin. The increase of bitcoin is due to the mass speculation. The reason bitcoin has value is because people say it has value within the cryptocurrency community. And the second people stop believing in its value; a huge correction will follow. Unfortunately if you go out into the public and ask the general population about bitcoin they either will not know what it is or they will say it is used for sketchy online uses. One thing holding bitcoin and cryptocurrencies back is the options. Bitcoin can not be adopted when there are 3 to 4 forms of it floating out there. There are not 3 forms of the US Dollar (do not talk about money breakdowns such as dollar, quarter, dime...). It also does not help that there are thousands of altcoins.
So yes, I do believe we are in a bubble. When will it pop? I frankly have no clue. It could tomorrow. It could next month. Or it could happen years from now. Hopefully when it does pop it wont be the end for bitcoin. It hopefully will just be a correction. Hopefully the 100 people that own 40 percent of bitcoin do not artificially crash the market to increase their position on the low.
As a side note, I am a believer in cryptocurrencies. I truly do want them to succeed. I just do not like seeing articles written by BBC and huge news media talking about it.
Also long live Litecoin.
I just like this photo.
