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Even if it is a bubble, that doesn't mean it can't go another 20x from here, depending which crypto you put your money in. There's cheap liquidity (ho ho ho sa
by charlesdm 9y ago
Even if it is a bubble, that doesn't mean it can't go another 20x from here, depending which crypto you put your money in.
There's cheap liquidity (ho ho ho said the FED and the ECB), there are institutions (pension funds) that are starting to buy in, and in comparison, the dot-com bubble (which was mainly a US led bubble, not global) went to $5.7tn to $1.7tn. Gold is worth $8tn globally. Why couldn't Bitcoin get to part of that level, e.g. $2tn?
It sure looks like a bubble, and it probably is, but it could literally be the largest bubble in our lives -- unlike one stock in the market, this is a global phenomenon + you only have a few currencies that matter.
- garybro 9y agoYou're not wrong. It very well could. I think there will be a major correction before (if) that happens, though.
- charlesdm 9y agoYou're not wrong either. And the higher it goes, the riskier it gets. And while I'm seeing signs of a bubble, I don't think that (excluding a few volatile 30-40% corrections along the way) we will see an implosion in 2018 just yet. The entire crypto space "only" equals the value of Facebook. In the end, if it goes another 30x from where we're at today, and then has an 80% correction, you'll still be up 6x. It only makes sense to exit if you think such a correction is imminent, or you believe the entire space is going to zero.
- matchagaucho 9y agoGold is worth $8tn globally Drawing comparisons between gold and a fiat currency (BTC) is completely confusing.
- Mtinie 9y ago“Fiat” usually implies something different from the way you are using it. No government has issued Bitcoin via fiat, there are no treasuries or armies backing it. Gold is a tangible commodity. I’ve been in the cryptoasset space for a while and I’m still not exactly sure how to cleanly classify it.
- exelius 9y agoIt's strayed so far from fundamentals that it's bound to crash. I really hope it's not that big when it does...
- charlesdm 9y agoBut how far? Corrections of 30% in say Bitcoin are common. Does this matter? I would say not -- it's not something I lose sleep over. It's fine, boom and bust. If you buy in, buy in during a consolidation phase, when you see the price is stable. Ethereum had a huge run up, yet then consolidated for around 6+ months around $300. I would say that is healthy. Now it's heading higher. "Fundamentals" aside, of course.
- deleted 9y ago[deleted]
- hndamien 9y agoYou love bankers that much? Boy we have come a long way since 2008. edit: Oh you said "hope it is not" - my mistake.
- exelius 9y agoIt's not that I love banks; it's that we rolled back all the banking regulation that kept that stuff in check prior to 2008. Replacing that with a system with zero regulation does not seem like progress...
- jordanpg 9y agoIt's not obvious to me that "fundamentals" apply here. This is literally unprecedented and cryptocurrency economies are uncharted territory.
- andr3w321 9y agoThe fundamentals are at the current price of $17,000/btc bitcoin mining costs are about $14.5B annually(144 blocks of 12.5 btc/block plus ~3.8 btc/block in fees) in electricity expenses due to paying off miners which is about on par with the 8th largest company in the world Facebook. Bitcoin's revenue/year is however much money people feel like FOMOing in + however much tether money bitfinex feels like printing which right now is more than the mining costs. Once this figure changes, the price will decline. For reference, Facebook has ~$24B in revenue/year.
- frakr 9y agoCan you provide proof of one pension fund that has bought in to crypto?
- charlesdm 9y agoMaybe not yet as of today, but they're coming. I have a friend (wealthy family with a substantial family office) who bought into crypto at the beginning of last year. His dad runs quite a large traditional investment fund and knows of people in his network working at pension funds that are looking at putting money into Bitcoin / Ethereum and others. The family has done private equity deals together with some of these funds (mostly raising debt financing from them). I'm not an extreme crypto bull, but I honestly think it's still early. But there will be massive volatility along the way. Note: not investment advice, obviously. Just my opinion.
- workthrowaway27 9y agoI used to work for a hedge fund. Now I'm in a different industry. While many individuals at the fund were interested in cryptocurrencies, they weren't going to put client money there. In order for pension funds to invest in cryptocurrencies there have to be very liquid securities that they can invest in. Futures don't count because almost no pension fund will use them directly (though pension funds do invest in hedge funds, which might have a futures strategy).
- amscanne 9y agoWow, pension funds should not be doing currency speculation. That's bad. The problem with crypto-_currency_ is that it's not a productive asset. A share of a business pays dividends over time and thus has intrinsic value (and _some_ speculative value), while a currency does not. A currency transaction is a zero-sum game, which is good because it minimizes friction. Buying cryptocurrency with the expectation of increases isn't investment, it's _speculation_.
- charlesdm 9y agoCrypto has been one of the better performing asset classes in the last 5 years. That is just a fact -- if looking in percentage terms. Pension funds generally allocate up to 5% of their portfolio to alternatives, which could be smaller funds investing in art, watches, music royalty rights, farmland, wine, and the likes. This also includes crypto. If you're an investment manager, it isn't necessarily crazy to allocate 0.2 or 0.5% of your portfolio to crypto and try to capture some of those gains.
- deepGem 9y agoThis is my belief too. I think if you can buy and hold for the next 5 years or so, massive volatility doesn't affect you. Volatility affects the day traders and the like. To draw a parallel to the stock market is not appropriate, but those who bought into MSFT or AMZN even during the peak of the dot com bubble have nothing to regret today.
- ericsoderstrom 9y agoWhat about people who bought pets.com or webvan stock, or any number of countless stocks which soon became worthless?
- njarboe 9y agoMost coins will become close to worthless, but many will survive and support whole new industries. And this time it looks like it wont be an ad supported future, thank $DIETY.
- Mtinie 9y agoThat’s a risk on any day of any calendar year. We can find points and counterpoints to prove any scenario.
- ericsoderstrom 9y agoThat was my point... OP had cherry picked the examples of microsoft and amazon to support the claim that buying and holding cryptocurrency through a bubble is a smart investment, which is of course absurd.
- deepGem 9y agoWhat I meant was that if you distribute your money across all cryptocurrencies even if some of them become worthlesss you won’t have anything to regret, in he long run. I don’t know if anyone who had the foresight to cherrypick MSFT and AMZN. Most of them invested in the tech basket. This is just general diversification principle nothing new
- alexcnwy 9y agoIt can also lose 20x. Losses hurt more than gains feel good. Utility theory suggests to sell if probability weighting of loss is high enough.
- vesrah 9y agoHow? If the value goes to 0 you lose 1x, not 20x.
- diab0lic 9y agoIt can become worth 1/20 of it's original value.
- qsucvatz 9y agoGoing to $0 is -Inf% loss.
- oscilloscope 9y agoThen if I lose 100% of my investment, how much have I lost?
- kamaal 9y agoEverything. Sometimes its easier to describe this in terms of words, than numbers and symbols.
- icebraining 9y agoEverything is not that bad. Many people lose more than that on the regular stock market (using leverage).
- hervature 9y agoUsually there is margin liquadation levels that are in place so you can't lose ore than 100%.