Bitcoin bubble... or not

BITCOIN
#1

A little bit of a clickbait-title, but I swear that it’s very benign.

I would like to discuss what everybody’s thoughts are on the latest batch of newcomers in crypto. More specifically, I am seeing a trend that a lot of people investing in crypto do not fully understand much of the fundamentals. In the deepest of their minds, they are not fully behind cryptocurrencies as being superior to fiat currency. They are only into cryptos to make gains in fiat; and fiat is still the baseline of their thinking.

This is dangerous because it makes the markets a lot more explosive and volatile. For example, John and Jane Doe bought into bitcoin at $4,500. They understand some of the technology, just not all of it nor the full implications of it. They do notice that other people have confidence and attribute value to this digital currency. And so they are enjoying the ride upwards as they see their portfolio value grow.

Now, when (not “if”, but really “when”) the FUD hits the fan, these are exactly the kind of people that will get out as soon as possible (and take their gains with them if they are quick enough).

I guess what I am trying to say is that there are 2 kinds of crypto participants:

  • Believers who will be unfazed by any movement of the markets, no matter how big.
  • Semi- or non-believers who are only in it for fiat gains.

The second category are just dangerous and big efforts need to be done to educate them so that they may understand. Imho, crypto is still falling short in that respect.

3 Likes
#2

I don’t see those who are just in it for fiat gains being dangerous. They’re traders by and large, and their buying and selling in the market just adds to the liquidity for the rest of us. So what if some people will follow a downward trend and sell off? You can buy what they’re selling at a cheaper price.

If there are a lot of people stupidly buying on margin or selling short, that could create problems of solvency with some of the exchanges, but I don’t think that there’s enough of that going on for it to really make a difference to any exchange and certainly not the market as a whole.

New crypto participants need more education on security and not losing their keys (and consequently never selling) more than anything else.

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#3

I think you could say the same thing about most all markets from equities to precious metals with the possible exception of the bond market.

What makes Bitcoin different is the goal of cryptocurrency is not to make money, but to become money which can be argued is directly linked to the implosion of the current debt-based, fiat money system and with quantitative tightening on the way, it shouldn’t be long now.

In the meantime, if things work out, a number of Bitcoin investors will be positioned to become the new 1%.

#4

Most people have no clue about the financial systems, intervention tools & strategies or even what actually this thing called ‘money’ is and how the value is determined. So many people still think a dollar is linked to gold and that when you buy gold in the financial markets that you can claim that amount in real gold.

I think Bitcoin and blockchain help a lot of people think twice (and learn) about the financial instruments we’re using and that allows each of us to form a more solid opinion. I’m also learning a lot and I partially view my purchase of cryptocurrencies as the purchase of courses as the more I spend the more I’m serious about learning about it.

Unfortunately, I am, just like many of us in the Crypto Pub are part of a minority (I believe).

I’ve seen this trend in other domains (all new concepts traveling the Gartner Hype Cycle) before. The people joining a domain early become true experts, but as the domain gain popularity more and more people join, start forming (often uneducated) opinion and they start sharing their view; educating others. Youtube is contributing to this a lot, as all other forms of social media. New people joining are very enthusiastic and also make a lot of noise, individually and collectively: feeding a hype and a partial bubble.

I’m very fascinated by the whole Bitconnect ‘trend’, which is an even bigger gold rush than the current jump in Bitcoin valuation.

I believe in blockchain in the long run. I believe Bitcoin has a role in this domain, as an asset or as money. I also believe that I will have a lot to learn before I can have a defendable opinion and I’m enjoying the adventure.

3 Likes
#5

I just looked into bitconnect yesterday for the first time. I didn’t go deep into it, but first impressions from the website were that it is scam (who’s paying this interest that you’re earning on bitconnect?!?). Any time I see a company trying to convince people of how much money you can make with them, but not talking about any real value that you’d be providing to make that money, then I don’t look much further.

The markets in general have become so corrupt that people are completely divorced from reality when it comes to investing, so they’re easy prey for scams.

#6

In my experience, most of the hype surrounding “Bitcoin” (as with any alt-coin) is mostly what is generating some of the neophytes getting into the space due to their Fear Of Mission Out. I think the use and development of more meta-/alt-coins is what will drive the innovation of the underlying currency base as a true currency medium. When most “investors” realize that any investment needs to have some underlying asset and cashflow base (just like any fiat currency needs an underlying economic base), maybe then they will become more knowledgeable into the currency derivative that underlies each alt-coin.
Just my humble opinion.