Question #1:
Is there a cryptocurrency (CC) bubble?
Global wealth as of 2016 was approximately $256 trillion. As of writing this post (Jan 6, 2018) the total market cap of CC is $813B. That’s .3% of the total global wealth. Given than CC is now considered a new asset class, and blockchain is a technology with lots of potential that can change the world, I would expect more inflows of capital into the cryptocurrecy asset class. All the major asset classes such as real estate, stocks, bonds, precious metals, etc.. are at least 10 times larger in value than the current valuation of CC. My point is that CC is relatively small and has a lot more room to grow.
However I do think that there are some CC out there that have billion dollar valuations and don’t have much more than a whitepaper backing them. This is what I would consider a bubble. Even coins that do have utility, having valuations that are larger than some of the biggest, well established companies in the world is something that just doesn’t feel right.
So, is CC a bubble? A bubble occurs when there is a lot of hype around a certain asset (ex: tulips, dot com). It also happens when the valuations are higher than reasonable. Is there hype around CC? Yes, and it’s growing. Are the valuations higher than normal? In some cases I think yes, but overall I think it is reasonable and will continue to grow.
Question #2:
When will the bubble pop?
This is important to know because if people want to make money from CC and keep their earnings, they need to get in, make money and get out before the bubble pops. People don’t want to be the last ones holding CC when the party ends.
When is the right time to get out? As Mike Novogratz recently put it “the herd is coming.” He was referring to the big money, banks, hedge funds, pension funds, etc... They saw the high returns and wanted in. I think 2018 is the year that big money as well as ordinary people start piling into CC even more. Once everyone puts their money in, (whatever they’re OK with losing say 1-10% of their portfolio, although some people are in 100%), the growth will start to flatline. That’s the signal that I will be looking out for. Once that happens, I will start limiting my portfolio. Because once people see the returns stagnating they will start asking questions such as “why are there 10 different coins worth $50B each that do basically the same thing?” They will start slowly limiting their exposure which will turn into a mad selloff stampede that will crash the CC market. I think we are still 1-2 years away from this event, but it’s good to be aware and prepared.
What are your thoughts?
Regards,
Grapefruit
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
Thanks for the post and welcome to steemit. If you think of crypto as the new future money supply then the values are not that high. But the transaction volumes are way to low and speculation on low trading volumes is dangerous as once the volume comes it can drive it either way. Which currencies win (will it be any of the existing ones or more like Gen 8) is the real question.
mrgrapefruit!! Thank you, your Post.