17 ms·

Lessons I Learned from the Dotcom Bubble for the Coming Cryptocurrency Bubble

137 points by nestorp 9y ago

kevando 9y ago
Does anyone think that when the crypto bubble bursts, that will cause a stock market level crash?
- alabamabill 9y ago
  :) , why would that happen?
- SirLJ 9y ago
  A+... this is like a geek storm in a glass of water... the average investor will not be harmed at all...
  - terminado 9y ago
    I try to think of crypto-currencies, and their collectors as a class not unlike POG collectibles and POG collectors. The age bracket associated with each probably experiences significant overlap too, so the idea seems fitting. Taken to extremes, if any given POG collector suddenly went bankrupt, due to a crash in values in the POG collector's price guide, how many people are associated with a particular POG collector? Would they notice, when that POG collector's business failed, because of an inability to meet obligations, now that all POG collections are worthless? If banks and businesses accept The POG as legal tender, how many transactions disappear with the POG craze, leaving them unpaid, or stuck holding worthless assets?
    - jpatokal 9y ago
      "POG"?
      - terminado 9y ago
        https://en.wikipedia.org/wiki/Pogs https://en.wikipedia.org/wiki/Pogs namesake of https://en.wikipedia.org/wiki/POG_(drink) https://en.wikipedia.org/wiki/POG_(drink)
      - Haydos585x2 9y ago
        Milhouse: I'm really sorry... I kind of traded your soul to the guy at the comic book store. But look! I got some cool pogs: [shows them] Milhouse: Alf pogs! Remember Alf? He's back... in pog form! https://www.reddit.com/r/OutOfTheLoop/comments/3dyh6j/what_is_alf_is_back_in_pog_form_come_from_and/ctakvyo/ https://www.reddit.com/r/OutOfTheLoop/comments/3dyh6j/what_i...
- olavgg 9y ago
  Not really, but the crypto currency community looks like a pyramid scheme. First users gets most of the coins.
  - isubkhankulov 9y ago
    its actually closer to a multi level marketing scheme, so only slightly less shady. but hey bitcoin works, the others? like gnosis, not so much
  - krabpaaltje 9y ago
    First users also have the risk of their investment becoming worthless.
    - tveita 9y ago
      All the users risk their 'investment' becoming worthless, that is not a risk exclusive to first users.
      - oculusthrift 9y ago
        yeah but it obviously takes less risk to invest in Apple in 2015 than 1978
  - product50 9y ago
    Do you have any idea what is going on here or are you ignoring away in bliss? This is as much a pyramid scheme as VC industry is in that early investors make disproportionate gains (and losses). Finding the right tokens to invest in is the challenge.
    - khazhoux 9y ago
      Only disproportionate gains, not losses. When a startup goes bust, every investor can only lose what they put in. No one loses multiples on their investment.
- throwaway9980 9y ago
  I have had multiple affluent friends who are absolutely non-tech non-geek ask me what are the hot coins. They're shoveling tens of thousands of dollars into Bitcoin, Ethereum, and Ripple based entirely on the fact that there's a run up happening. They have no understanding of what it is and the intention is sell to the greater fool after another 10x move. Maybe it isn't a bubble, but it sure does walk like a duck and talk like a duck.
  - prostoalex 9y ago
    Tens of thousands of dollars can be shovelled into low-probability high-risk outcomes nightly at a single Vegas table, of which there are many, at a single casino, of which there are many. The state lottery jackpot can swell by tens of millions of dollars in a single day when the potential payout reaches nine digits. This is just high-stakes gambling, it's not a systemic bubble until pension funds, university endowments or state sovereign funds get significant exposure.
    - lsseckman 9y ago
      this is a great point. And given market caps I doubt there are any sizeable funds invested, which may point to no bubble at all.
  - loblollyboy 9y ago
    are these guy all gonna sell at 10k? I'm not rich and love the idea of BTC, but the gambler in me is looking to 10k - mainly b/c I think thats what the ppl with real money on the table are looking to
    - dennyis 9y ago
      Please do yourself a favor and invest in other things too. I'm also a bitcoin believer, but it's a relatively small part of my holdings, which are mostly in real estate.
- cbanek 9y ago
  It's entirely possible it might be the catalyst for a large unwinding. Let me just set up a hypothetical scenario: Bitcoin prices begin to unwind (trigger: emotion? unknown unknown?). Chinese holders of bitcoin, who have been using them to get out of the yuan and avoiding capital regulations, start selling, accelerating the problem. Chinese WMPs (wealth management products) that may hold bitcoin start to default or go under, accelerating the deflation of the current Chinese debt and borrowing bubble. Global market contagion risk from China causes markets to rethink what is going on? The US has been calling for a correction for months, and the VIX is stubbornly low. Central banks have interest rates very low but are trying to tighten, and if they tighten into weakness it might cause a recession.
  - prostoalex 9y ago
    How many Chinese buyers of BTC are buy-and-hold investors into BTC itself versus just using cryptocurrency as a transfer mechanism for real estate, commodities or fiat currency investments?
  - stult 9y ago
    I'd say the causality is more likely to go in the opposite direction. A slowdown in China provokes a slowdown in capital flight via crypto which triggers the crash. It might actually be the canary in the coal mine of a global recession. Barring significant positive reform in Chinese capital markets as an alternative explanation, I am going to start getting scared when I see a crash in the Vancouver, BC real estate market coinciding with a crypto crash.
    - rayuela 9y ago
      I think a slowdown in China would actually accelerate capital outflows and further inflate crytocurrency valuations.
      - stult 9y ago
        I would expect to see a surge and then a rapid drop off, but I think we've been in the surge for a while now. The surge reflects people not having faith in native Chinese markets, which has already been the case for most well-off, well-informed Chinese. They know their stock markets are a joke and that the government has been driving investment toward pointless building projects. The real estate market has been irrationally exuberant, in no small part because of the absence of alternative long-term savings vehicles such as interest bearing accounts or a reliable stock market. They also don't have complete faith in their government's respect for property rights and know having the option to flee abroad if things go south is invaluable. And the PRB has been slowly ratcheting down the markup they pay on US dollars as an export subsidy, so the incentive to convert US dollars to renminbi relative to offshoring earnings via bitcoin or other channels has been declining over the past few years. Just to clarify what I mean because a lot of people don't realize this, but many Chinese exporters receive payment for goods in US dollars (or other foreign currency). The People's Republic Bank of China (their central bank) purchases those dollars with renminbi at a markup over the fair market value, basically giving the Chinese exporters a subsidy. That's part of why the PRB has such enormous US Treasury holdings. They bought so many US dollars that they couldn't invest them in anything other than US Treasuries. A billion dollars in cash is an asset. A trillion is an unmanageable inflation risk. The PRB has been trying to move away from that model because they know it isn't long-term sustainable. So as that implicit subsidy declines, Chinese manufacturers receiving US dollars find alternative methods for converting their excess currency, such as BTC or other foreign currencies (e.g. the Canadian dollar), relatively more attractive. The bottom line is that anyone who can afford to expatriate their capital has been doing so at the maximum viable rate for a long time now. A slowdown would simply reduce the amount that is available to expatriate, decreasing the US dollar -> BTC purchases and accelerating the BTC -> hard foreign assets such as real estate, reducing the total market cap for BTC. It's also possible the PRB might react to a slowdown by once again increasing the implicit export subsidy, which would divert funds from BTC transactions back into renminbi and further accelerate a crypto crash.
- RandomInteger4 9y ago
  It depends on how big the derivatives market for cryptocurrencies is; i.e. how much is leveraged in bets related to cryptocurrencies.
chamza 9y ago
Internet companies during the dotcom bubble had market value of several trillion dollars. The total market cap of crypto-currency is still only ~$70 billion. I agree with the principle, but this boom is still pretty modest.
- coolspot 9y ago
  I think it is not absolute value what defines a bubble. It should be relative. E.g. perceived value of an asset compared to it's real value/revenue/growth.
  - dmichulke 9y ago
    To provide a context here - one of the key value propositions of BTC is real interest rate. Cash real interest rate: 0% interest - 2% inflation through debasing currency = -2% BTC real interest rate: 0% interest - 0% inflation = 0% Note how this benefit of BTC is not bubbly by itself (growth expectation usually is - due to it being based on past growth)
    - runeks 9y ago
      Prices only remain flat (0% inflation) if no increase in productivity occurs. 2% inflation doesn't mean the currency has been debased by 2%, it means: if it has become x% cheaper to produce a basket of goods -- and the price of this basket of goods has increased by 2% -- the currency has been devalued by (2+x)%. Producers are constantly competing to cut the costs of production, in order to gain market share at the expense of competitors, so I don't see how flat prices can be a reasonable assumption.
      - dmichulke 9y ago
        Increase in production increases supply, so prices fall -> deflation. Yes, inflation can have other reasons than debasement (for example, productivity decrease) but this affects both types of "money" - fiat and bitcoin, so I left it out to keep it simple
- 9y ago
anjc 9y ago
Sounds like you're conflating the value of the coins with the corporate value being invested. Corporations are dedicating a desk or a lab or a few staff to Crypto. There may be a decrease in the value of coins but there's no bubble to pop on the organisational side.
Ologn 9y ago
The difference is the dot-com stocks had some theoretical value - even Pets.com, people buy pet supplies online after all. Unlike commodities, equities and so forth, cryptocoins have no value whatsoever. So to try to make it sound like it has worth, its pushers have to cast about for anything they can and finally come upon the only thing they can - the dollar. In fact, they say, it's even better than the dollar. It would take too long to explain here why the Bitcoin is not like the only thing they have left to compare it to, the dollar. Also, an explanation won't sway anyone who has already had a drink of the kool-aid any how. May I recommend another message board for all those high on cryptocoins here - 4chan ( http://boards.4chan.org/biz/catalog http://boards.4chan.org/biz/catalog ). 4chan /biz/ is filled with uneducated, poor kids all looking to get wealthy with little work on the cryptocoin get rich quick schemes. I think it's a much better message board for all of you of this bent. Here on HN there are still some people who believe in studying math and science and engineering and CS at universities, and then going and doing a lot of hard work and creating wealth. 4chan is mostly filled with your types - the get-rich-quick scam artists. Go read 4chan /biz/ right now - it's filled with no work, no study, get rich quick types like yourself. Leave and go there. HN will be stuck with those "out of it" old fogies who actually believe in study, hard work, that commodities need value to have worth in the long-term, and old-fashioned, out of touch ideas like that.
- lobster2 9y ago
  /biz/ has been great for me, I bought some MOONCOINS at 1 satoshi and I will sell next week at 5 sat at least once the current sell walls have been broken. There also is a very active community behind MOONCOIN. Why are you so dismissive of this new technology? Can you expand on your idea?
  - Ologn 9y ago
    > Why are you so dismissive of this new technology? I'm skeptical of the idea that Bitcoins have value in the way commodities and other things which can be traded and exchanged have value. People might find some use for blockchain technology, but the speculation around the value of Bitcoins is ridiculous. It's a bubble like any other bubble. The notion that a Bitcoin can remain at a $2000 value is absurd. The current top comment says "Internet companies during the dotcom bubble had market value of several trillion dollars. The total market cap of crypto-currency is still only ~$70 billion. I agree with the principle, but this boom is still pretty modest." Well there you go. I have an old worn sock with a hole in it that I am throwing away. It is worth $500. It is worth $500 because I am willing to pay $500 for it. I am capable of creating a bubble of that size. Even a $70 billion bubble can be created apparently. Once it reaches a certain point it will pop. Your point about Mooncoins points to it - as a Bitcoin is worthless, clones like Mooncoins can be created as speculative bubbles. Eventually it will no longer be a micro-economic oddity like my $500 sock, but will bump up against the market as a whole and collapse like every other speculative bubble. It's not blockchain technology, which may or may not have worth at some point. It's the speculative bubble on cryptocoin choice. As I said, Pets.com and Webvan made sense on some level. Just not the valuations they had at the time. And Bitcoins valuation is even sillier than theirs, since Webvan was not a bad idea, it just had a few problems including being ahead of its time.
1001101 9y ago
Glad I sold my Amazon stock in 1999.
- nimchimpsky 9y ago
  lol
- wmf 9y ago
  1999 wasn't a bad time to sell Amazon stock, actually, since it got punished in the bust and took years to return to 1999 levels. But Amazon is a huge exception because it was a real company and most dotcoms weren't.
jonnathanson 9y ago
Respectfully, I think a lot of comments on this topic are missing the point of the author's advice. Whether there is or is not a bubble, and if there is, how big that bubble might get, are irrelevant here. That's not what this article is about. First, the author assumes there is a bubble brewing. That's not his thesis; that's his background assumption. His thesis is that, assuming there is a bubble, you should do X, Y, and Z, and not do A, B, and C. So yeah, after reading this, we could argue once again about whether there's a bubble or not. But the more interesting argument is about whether his advice is sound. Not whether his assumption is sound.
- yamaneko 9y ago
  One of his advices is: > 2. Beware vanity metrics Can we tell if BitCoin and other cryptocurrencies has any vanity metrics? If so, what would that be? My uneducated guess would be how valuable the currency is in Dollars. The currency seems virtually inflated as we don't know how much of that would translate to real purchasing power. It doesn't seem that it would be possible to many people to sell it all out. Thus, who invested in it would be supposed to keep using within the coin's network, and given that a transaction takes awhile and there are not many shops accepting it, it would be hard to get some return. In addition, BitCoin has fluctuated a lot since 2012 and there were several issues in its way, like the lead maintainer stepping out, capacity limit being reached because of block chain monopoly, Mt Gox bankruptcy etc.
  - wmf 9y ago
    I've seen number of transactions used as a vanity metric. This leads some people to "spend and rebuy" BTC to juice that. Number of full nodes also looks like a vanity metric.
  - throwaway41597 9y ago
    Current vanity metrics seem to include "market capitalization" and amount raised during ICO. It is true that those have become signal in the current noise but it speaks about how frothy things are. Crytocurrencies simply are hard to value because you don't know how many users they've got.
Entangled 9y ago
I will make a prediction so I can come back and make fun of myself in a month. It is a bubble and it will pop real soon going down back to $500 bringing down all the alts with it, then it will slowly go up again at a normal pace for the next couple of years.
- panzer_wyrm 9y ago
  Soo just the way it did three times already at different levels.
learc83 9y ago
If governments start to actually fear that their monopoly on creating currency is in danger, they will destroy crypto currency. Bitcoin may be decentralized, but they can go after currency converters. They can make holding it illegal. They can make mining it illegal. They can make trading it illegal. They can manipulate the market to crash the value of bitcoin with (to them) pocket change.
- corv 9y ago
  By the time governments fear that cryptocurrency could overtake fiat too many voters may already be in favor of keeping cryptoassets.
- typednothing 9y ago
  > they can go after currency converters Only in their own jurisdiction. The US already goes after those, but it won't help as long as other countries don't. > They can make holding it illegal. Unenforceable. Making the knowledge of a secret key illegal would simply be weird. Bitcoins have no physical incarnation. So, you cannot "hold" them in your hand. > They can make mining it illegal. Unenforceable. It is very easy to hide that a machine is mining. Furthermore, such machines can be located in any country of the world. > They can make trading it illegal. They already try to do that. It doesn't help. > They can manipulate the market to crash the value of bitcoin with (to them) pocket change. They would first have to buy up a lot of bitcoin in order to dump them and crash the market. While buying up the coins, they are pushing its value up. When selling them, they just go back to the point they came from. Hence, the strategy would be totally ineffective. What's more, if governments attack the internet, people will discover that the reverse is much, much easier. Using the internet to orchestrate attacks against the government, is simply trivial to organize.
problems 9y ago
Can we get this renamed to reflect that that is a cryptocurrency bubble and not a "crypto bubble"? It certainly isn't discussing companies working on cryptographic technologies like I initially assumed.
- dang 9y ago
  Ok, we added 'currency' above.
ufo 9y ago
What did the cummulative registered users metric mean in the dot com days?
S410520 9y ago
Don't borrow to invest in something? Ever heard of leverage? Such a stupid argument. How about you talk about why that carries so much risk and teach people something instead of this click bait shit

137 points by nestorp 9y ago

kevando 9y ago

Does anyone think that when the crypto bubble bursts, that will cause a stock market level crash?

alabamabill 9y ago
:) , why would that happen?
SirLJ 9y ago
A+... this is like a geek storm in a glass of water... the average investor will not be harmed at all...
- terminado 9y ago
  I try to think of crypto-currencies, and their collectors as a class not unlike POG collectibles and POG collectors. The age bracket associated with each probably experiences significant overlap too, so the idea seems fitting. Taken to extremes, if any given POG collector suddenly went bankrupt, due to a crash in values in the POG collector's price guide, how many people are associated with a particular POG collector? Would they notice, when that POG collector's business failed, because of an inability to meet obligations, now that all POG collections are worthless? If banks and businesses accept The POG as legal tender, how many transactions disappear with the POG craze, leaving them unpaid, or stuck holding worthless assets?
  - jpatokal 9y ago
    "POG"?
    - terminado 9y ago
      https://en.wikipedia.org/wiki/Pogs https://en.wikipedia.org/wiki/Pogs namesake of https://en.wikipedia.org/wiki/POG_(drink) https://en.wikipedia.org/wiki/POG_(drink)
    - Haydos585x2 9y ago
      Milhouse: I'm really sorry... I kind of traded your soul to the guy at the comic book store. But look! I got some cool pogs: [shows them] Milhouse: Alf pogs! Remember Alf? He's back... in pog form! https://www.reddit.com/r/OutOfTheLoop/comments/3dyh6j/what_is_alf_is_back_in_pog_form_come_from_and/ctakvyo/ https://www.reddit.com/r/OutOfTheLoop/comments/3dyh6j/what_i...
olavgg 9y ago
Not really, but the crypto currency community looks like a pyramid scheme. First users gets most of the coins.
- isubkhankulov 9y ago
  its actually closer to a multi level marketing scheme, so only slightly less shady. but hey bitcoin works, the others? like gnosis, not so much
- krabpaaltje 9y ago
  First users also have the risk of their investment becoming worthless.
  - tveita 9y ago
    All the users risk their 'investment' becoming worthless, that is not a risk exclusive to first users.
    - oculusthrift 9y ago
      yeah but it obviously takes less risk to invest in Apple in 2015 than 1978
- product50 9y ago
  Do you have any idea what is going on here or are you ignoring away in bliss? This is as much a pyramid scheme as VC industry is in that early investors make disproportionate gains (and losses). Finding the right tokens to invest in is the challenge.
  - khazhoux 9y ago
    Only disproportionate gains, not losses. When a startup goes bust, every investor can only lose what they put in. No one loses multiples on their investment.
throwaway9980 9y ago
I have had multiple affluent friends who are absolutely non-tech non-geek ask me what are the hot coins. They're shoveling tens of thousands of dollars into Bitcoin, Ethereum, and Ripple based entirely on the fact that there's a run up happening. They have no understanding of what it is and the intention is sell to the greater fool after another 10x move. Maybe it isn't a bubble, but it sure does walk like a duck and talk like a duck.
- prostoalex 9y ago
  Tens of thousands of dollars can be shovelled into low-probability high-risk outcomes nightly at a single Vegas table, of which there are many, at a single casino, of which there are many. The state lottery jackpot can swell by tens of millions of dollars in a single day when the potential payout reaches nine digits. This is just high-stakes gambling, it's not a systemic bubble until pension funds, university endowments or state sovereign funds get significant exposure.
  - lsseckman 9y ago
    this is a great point. And given market caps I doubt there are any sizeable funds invested, which may point to no bubble at all.
- loblollyboy 9y ago
  are these guy all gonna sell at 10k? I'm not rich and love the idea of BTC, but the gambler in me is looking to 10k - mainly b/c I think thats what the ppl with real money on the table are looking to
  - dennyis 9y ago
    Please do yourself a favor and invest in other things too. I'm also a bitcoin believer, but it's a relatively small part of my holdings, which are mostly in real estate.
cbanek 9y ago
It's entirely possible it might be the catalyst for a large unwinding. Let me just set up a hypothetical scenario: Bitcoin prices begin to unwind (trigger: emotion? unknown unknown?). Chinese holders of bitcoin, who have been using them to get out of the yuan and avoiding capital regulations, start selling, accelerating the problem. Chinese WMPs (wealth management products) that may hold bitcoin start to default or go under, accelerating the deflation of the current Chinese debt and borrowing bubble. Global market contagion risk from China causes markets to rethink what is going on? The US has been calling for a correction for months, and the VIX is stubbornly low. Central banks have interest rates very low but are trying to tighten, and if they tighten into weakness it might cause a recession.
- prostoalex 9y ago
  How many Chinese buyers of BTC are buy-and-hold investors into BTC itself versus just using cryptocurrency as a transfer mechanism for real estate, commodities or fiat currency investments?
- stult 9y ago
  I'd say the causality is more likely to go in the opposite direction. A slowdown in China provokes a slowdown in capital flight via crypto which triggers the crash. It might actually be the canary in the coal mine of a global recession. Barring significant positive reform in Chinese capital markets as an alternative explanation, I am going to start getting scared when I see a crash in the Vancouver, BC real estate market coinciding with a crypto crash.
  - rayuela 9y ago
    I think a slowdown in China would actually accelerate capital outflows and further inflate crytocurrency valuations.
    - stult 9y ago
      I would expect to see a surge and then a rapid drop off, but I think we've been in the surge for a while now. The surge reflects people not having faith in native Chinese markets, which has already been the case for most well-off, well-informed Chinese. They know their stock markets are a joke and that the government has been driving investment toward pointless building projects. The real estate market has been irrationally exuberant, in no small part because of the absence of alternative long-term savings vehicles such as interest bearing accounts or a reliable stock market. They also don't have complete faith in their government's respect for property rights and know having the option to flee abroad if things go south is invaluable. And the PRB has been slowly ratcheting down the markup they pay on US dollars as an export subsidy, so the incentive to convert US dollars to renminbi relative to offshoring earnings via bitcoin or other channels has been declining over the past few years. Just to clarify what I mean because a lot of people don't realize this, but many Chinese exporters receive payment for goods in US dollars (or other foreign currency). The People's Republic Bank of China (their central bank) purchases those dollars with renminbi at a markup over the fair market value, basically giving the Chinese exporters a subsidy. That's part of why the PRB has such enormous US Treasury holdings. They bought so many US dollars that they couldn't invest them in anything other than US Treasuries. A billion dollars in cash is an asset. A trillion is an unmanageable inflation risk. The PRB has been trying to move away from that model because they know it isn't long-term sustainable. So as that implicit subsidy declines, Chinese manufacturers receiving US dollars find alternative methods for converting their excess currency, such as BTC or other foreign currencies (e.g. the Canadian dollar), relatively more attractive. The bottom line is that anyone who can afford to expatriate their capital has been doing so at the maximum viable rate for a long time now. A slowdown would simply reduce the amount that is available to expatriate, decreasing the US dollar -> BTC purchases and accelerating the BTC -> hard foreign assets such as real estate, reducing the total market cap for BTC. It's also possible the PRB might react to a slowdown by once again increasing the implicit export subsidy, which would divert funds from BTC transactions back into renminbi and further accelerate a crypto crash.
RandomInteger4 9y ago
It depends on how big the derivatives market for cryptocurrencies is; i.e. how much is leveraged in bets related to cryptocurrencies.

chamza 9y ago

Internet companies during the dotcom bubble had market value of several trillion dollars. The total market cap of crypto-currency is still only ~$70 billion. I agree with the principle, but this boom is still pretty modest.

coolspot 9y ago
I think it is not absolute value what defines a bubble. It should be relative. E.g. perceived value of an asset compared to it's real value/revenue/growth.
- dmichulke 9y ago
  To provide a context here - one of the key value propositions of BTC is real interest rate. Cash real interest rate: 0% interest - 2% inflation through debasing currency = -2% BTC real interest rate: 0% interest - 0% inflation = 0% Note how this benefit of BTC is not bubbly by itself (growth expectation usually is - due to it being based on past growth)
  - runeks 9y ago
    Prices only remain flat (0% inflation) if no increase in productivity occurs. 2% inflation doesn't mean the currency has been debased by 2%, it means: if it has become x% cheaper to produce a basket of goods -- and the price of this basket of goods has increased by 2% -- the currency has been devalued by (2+x)%. Producers are constantly competing to cut the costs of production, in order to gain market share at the expense of competitors, so I don't see how flat prices can be a reasonable assumption.
    - dmichulke 9y ago
      Increase in production increases supply, so prices fall -> deflation. Yes, inflation can have other reasons than debasement (for example, productivity decrease) but this affects both types of "money" - fiat and bitcoin, so I left it out to keep it simple
9y ago

anjc 9y ago

Sounds like you're conflating the value of the coins with the corporate value being invested. Corporations are dedicating a desk or a lab or a few staff to Crypto. There may be a decrease in the value of coins but there's no bubble to pop on the organisational side.

Ologn 9y ago

The difference is the dot-com stocks had some theoretical value - even Pets.com, people buy pet supplies online after all. Unlike commodities, equities and so forth, cryptocoins have no value whatsoever. So to try to make it sound like it has worth, its pushers have to cast about for anything they can and finally come upon the only thing they can - the dollar. In fact, they say, it's even better than the dollar. It would take too long to explain here why the Bitcoin is not like the only thing they have left to compare it to, the dollar. Also, an explanation won't sway anyone who has already had a drink of the kool-aid any how. May I recommend another message board for all those high on cryptocoins here - 4chan ( http://boards.4chan.org/biz/catalog http://boards.4chan.org/biz/catalog ). 4chan /biz/ is filled with uneducated, poor kids all looking to get wealthy with little work on the cryptocoin get rich quick schemes. I think it's a much better message board for all of you of this bent. Here on HN there are still some people who believe in studying math and science and engineering and CS at universities, and then going and doing a lot of hard work and creating wealth. 4chan is mostly filled with your types - the get-rich-quick scam artists. Go read 4chan /biz/ right now - it's filled with no work, no study, get rich quick types like yourself. Leave and go there. HN will be stuck with those "out of it" old fogies who actually believe in study, hard work, that commodities need value to have worth in the long-term, and old-fashioned, out of touch ideas like that.

lobster2 9y ago
/biz/ has been great for me, I bought some MOONCOINS at 1 satoshi and I will sell next week at 5 sat at least once the current sell walls have been broken. There also is a very active community behind MOONCOIN. Why are you so dismissive of this new technology? Can you expand on your idea?
- Ologn 9y ago
  > Why are you so dismissive of this new technology? I'm skeptical of the idea that Bitcoins have value in the way commodities and other things which can be traded and exchanged have value. People might find some use for blockchain technology, but the speculation around the value of Bitcoins is ridiculous. It's a bubble like any other bubble. The notion that a Bitcoin can remain at a $2000 value is absurd. The current top comment says "Internet companies during the dotcom bubble had market value of several trillion dollars. The total market cap of crypto-currency is still only ~$70 billion. I agree with the principle, but this boom is still pretty modest." Well there you go. I have an old worn sock with a hole in it that I am throwing away. It is worth $500. It is worth $500 because I am willing to pay $500 for it. I am capable of creating a bubble of that size. Even a $70 billion bubble can be created apparently. Once it reaches a certain point it will pop. Your point about Mooncoins points to it - as a Bitcoin is worthless, clones like Mooncoins can be created as speculative bubbles. Eventually it will no longer be a micro-economic oddity like my $500 sock, but will bump up against the market as a whole and collapse like every other speculative bubble. It's not blockchain technology, which may or may not have worth at some point. It's the speculative bubble on cryptocoin choice. As I said, Pets.com and Webvan made sense on some level. Just not the valuations they had at the time. And Bitcoins valuation is even sillier than theirs, since Webvan was not a bad idea, it just had a few problems including being ahead of its time.

1001101 9y ago

Glad I sold my Amazon stock in 1999.

nimchimpsky 9y ago
lol
wmf 9y ago
1999 wasn't a bad time to sell Amazon stock, actually, since it got punished in the bust and took years to return to 1999 levels. But Amazon is a huge exception because it was a real company and most dotcoms weren't.

jonnathanson 9y ago

Respectfully, I think a lot of comments on this topic are missing the point of the author's advice. Whether there is or is not a bubble, and if there is, how big that bubble might get, are irrelevant here. That's not what this article is about. First, the author assumes there is a bubble brewing. That's not his thesis; that's his background assumption. His thesis is that, assuming there is a bubble, you should do X, Y, and Z, and not do A, B, and C. So yeah, after reading this, we could argue once again about whether there's a bubble or not. But the more interesting argument is about whether his advice is sound. Not whether his assumption is sound.

yamaneko 9y ago
One of his advices is: > 2. Beware vanity metrics Can we tell if BitCoin and other cryptocurrencies has any vanity metrics? If so, what would that be? My uneducated guess would be how valuable the currency is in Dollars. The currency seems virtually inflated as we don't know how much of that would translate to real purchasing power. It doesn't seem that it would be possible to many people to sell it all out. Thus, who invested in it would be supposed to keep using within the coin's network, and given that a transaction takes awhile and there are not many shops accepting it, it would be hard to get some return. In addition, BitCoin has fluctuated a lot since 2012 and there were several issues in its way, like the lead maintainer stepping out, capacity limit being reached because of block chain monopoly, Mt Gox bankruptcy etc.
- wmf 9y ago
  I've seen number of transactions used as a vanity metric. This leads some people to "spend and rebuy" BTC to juice that. Number of full nodes also looks like a vanity metric.
- throwaway41597 9y ago
  Current vanity metrics seem to include "market capitalization" and amount raised during ICO. It is true that those have become signal in the current noise but it speaks about how frothy things are. Crytocurrencies simply are hard to value because you don't know how many users they've got.

Entangled 9y ago

I will make a prediction so I can come back and make fun of myself in a month. It is a bubble and it will pop real soon going down back to $500 bringing down all the alts with it, then it will slowly go up again at a normal pace for the next couple of years.

panzer_wyrm 9y ago
Soo just the way it did three times already at different levels.

learc83 9y ago

If governments start to actually fear that their monopoly on creating currency is in danger, they will destroy crypto currency. Bitcoin may be decentralized, but they can go after currency converters. They can make holding it illegal. They can make mining it illegal. They can make trading it illegal. They can manipulate the market to crash the value of bitcoin with (to them) pocket change.

corv 9y ago
By the time governments fear that cryptocurrency could overtake fiat too many voters may already be in favor of keeping cryptoassets.
typednothing 9y ago
> they can go after currency converters Only in their own jurisdiction. The US already goes after those, but it won't help as long as other countries don't. > They can make holding it illegal. Unenforceable. Making the knowledge of a secret key illegal would simply be weird. Bitcoins have no physical incarnation. So, you cannot "hold" them in your hand. > They can make mining it illegal. Unenforceable. It is very easy to hide that a machine is mining. Furthermore, such machines can be located in any country of the world. > They can make trading it illegal. They already try to do that. It doesn't help. > They can manipulate the market to crash the value of bitcoin with (to them) pocket change. They would first have to buy up a lot of bitcoin in order to dump them and crash the market. While buying up the coins, they are pushing its value up. When selling them, they just go back to the point they came from. Hence, the strategy would be totally ineffective. What's more, if governments attack the internet, people will discover that the reverse is much, much easier. Using the internet to orchestrate attacks against the government, is simply trivial to organize.

problems 9y ago

Can we get this renamed to reflect that that is a cryptocurrency bubble and not a "crypto bubble"? It certainly isn't discussing companies working on cryptographic technologies like I initially assumed.

dang 9y ago
Ok, we added 'currency' above.

ufo 9y ago

What did the cummulative registered users metric mean in the dot com days?

S410520 9y ago

Don't borrow to invest in something? Ever heard of leverage? Such a stupid argument. How about you talk about why that carries so much risk and teach people something instead of this click bait shit