7 ms·

Ask HN: What similarities might the crypto market have with the dot com bubble?

• brokensegue 9y ago
  both involve irrational exuberance?
• thisisit 9y ago
  I think stories like the one about Long Island Tea adding blockchain to the name and seeing their stocks soaring. More examples here: https://www.nytimes.com/2017/12/21/technology/bitcoin-blockchain-stock-market.html https://www.nytimes.com/2017/12/21/technology/bitcoin-blockc... During the dot com bubble everyone was doing something similar.
• amluto 9y ago
  In the dot-com bubble, people invested in companies that had websites, but for some reason, they thought they were investing in domain names ending in ".com". In the crypto bubble, people are investing in Bitcoin, Ether, etc., but they think they're investing in cryptography. </sarcasm>
• noncoml 9y ago
  I’ll give you similarities of the Bitcoin with a Ponzi scheme: From wikipedia: "A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game)[1] is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading." Bitcoin's only real value is that of the chance of being adopted as currency. For it to become a currency people have to start buying bitcoins, as it is the only realistic way to get hold of them. So the only way to make value for the current holders(older invenstors) is more people buying into it(revenue paid by new investors).
  • alexeldeib 9y ago
    It's funny, I frequently come across two views on bitcoin: the parallel you presented, and that it's not a currency but a store of wealth or other generic asset (comparable to gold). I must say I find the Ponzi framing more compelling, although I have some hope yet for Lightning/insert hot scaling idea here to improve the viability as a currency at least incrementally. As a currency, I have little hope for bitcoin in its current form. This is an area where it remains possible in my mind for an upstart coin to displace it. Some people seem to care about this; I've looked at a few niche coins that seem to care about this concept and focus on transaction speed, but none have made great progress yet.
    • another-one-off 9y ago
      The gold analogy makes me so nervous. Gold has specific and permanent properties (eg, high density, an entry in the periodic table :P). Many detractors of gold claim those properties are not valuable, but it still has them and is specific and unique. Bitcoin has mathematical properties that can be 100% cloned. The only thing that makes bitcoin unique from some random bitcoin clone is that it has the backing of a big mining networks. I firmly believe that whatever value bitcoin has is tied to the size of the mining network, and by extension to the energy burned to transact bitcoins. This simply isn't close to being permanent in the same way gold is. It could potentially work like a social thing, and go the way of, eg, MySpace. I don't see how that can hold its value for a generation; the risk of current prices being a blip is still very high.
      • coralreef 9y ago
        Bitcoin can be cloned the same way Facebook can be cloned. You could spend a billion dollars copying Facebook's features and spend a billion marketing it, and you'd still fail. The mining network behind it, the developer ecosystem working on wallets/libraries/services, etc. is the hard part to copy. It's worth the most, therefore it attracts the most time and attention, which helps to maintain its value. It may not be the best from a technical standpoint, but the size of it ensures a healthy financial incentive to improve upon it, which we're seeing now with layered scaling efforts (lightning network).
• seibelj 9y ago
  This is the worst forum of all to ask a question like this. HN is full of people who think they are smarter than everyone else, and a vocal group here has been saying “bitcoin is a scam” since bitcoin was $1 and missed out on the rise. So now they are actively rooting for it and all cryptos to fail, and ignore the benefits of the blockchain. Additionally a lot of YC-type people benefit by the current VC system and funding via ICO’s or similar mechanisms is anethema to what they have constructed. I know many wealthy cryptos and they don’t have time for the noise here. Bitcoin could fall to $1000 and they are still rich, they don’t care about bubble talk.
  • alexssung 9y ago
    You're gonna get downvoted, but there is truth in your comment. I wouldn't have made money with Bitcoin if I had paid attention to all the negative comments on HN. I know I know, just because I profited on Bitcoin doesn't rule it out as a Ponzi scheme or whatever HN calls Bitcoin nowadays. I and many others genuinely believe that Bitcoin provides great value through its underlying technology and also has the potential to become something greater.
  • nercht12 9y ago
    That's speculative market value, though. You can't actually go to your local coffee shop with 10k in Bitcoin and buyout the stock. They may treat it like $2. I'm not one of the people crying "scam", but I think most people here recognize how risky it is. If someone wants to take that risk, that's their deal.
    • seibelj 9y ago
      It might be risky but HN is generally full of nerds that love new technology. When it comes to crypto currency suddenly everyone here is fucking Warren Buffett. We are literally living in a Neil Stephenson novel and HN as a group is collectively sticking their fingers in their ears. It’s amazing the visceral reaction crypto gets here, the people who don’t like it can’t simply ignore the posts, they write 5000 word screeds and vote with hive mind to stop alternate opinions.
• kakaorka 9y ago
  I know for now that crypto currencies are really only worth something as long as they are used as “currencies”. I don’t believe bitcoin is currently being used as currency to buy/sell stuff, rather it’s used increasingly as an investment, which I don’t believe any currency should be especially when it’s this unstable.
  • lallysingh 9y ago
    I think there's some belief that the current issues Bitcoin has in transaction rate/cost can be addressed in a software update.
    • flyGuyOnTheSly 9y ago
      The problem with Bitcoin is that the transaction rate/cost has been a problem for years now and the core dev team isn't budging.
    • yeahsure 9y ago
      These issues have already been fixed by other crypto currencies like Bitcoin Cash. The core development team behind Bitcoin doesn't seem to be interested in fixing these problems for the time being.
• deepGem 9y ago
  IMHO, most of the recent purchases of Bitcoin are mostly because of FOMO. That's the only explanation I can gather for something that increases in value so rapidly without any underlying change in the fundamentals. Quite a similar phenomenon happened during the dot com bubble too. Because of FOMO, people blindly invested in stocks that proved to be worthless later. So the only similarity I see is irrational investment fueled by FOMO.
• abecedarius 9y ago
  The clearest similarity, I'd say, is that so many people don't understand what they're buying, so they go by a vague story and a price trend and guessing the mass psychology of other investors. That can't end well. I think in both cases there was tremendous real potential, but it's hard to pick out in the moment, even with a technical background -- there's more to winning than technology.
  • eeho 9y ago
    I know a few people who signed up for coinbase and bought Litecoin because it was the cheapest per arbitrary unit, without doing any reading on what differentiates it from Bitcoin or Ethereum. I've also seen similar attitudes towards more fringe coins. I'm not old enough to remember the dotcom bubble but I wonder if things like pets.com benefitted from people conflating its potential to that of ebay or amazon.
• sudoLFMB 9y ago
  Full disclosure I work for a firm that's helping launch the next generation of crypto/fiat brokers that will be popping up through out the world the next couple months. My dad is a chip engineer and has personally worked with kurzweil on some of his early ventures. One of his xmas bonus was a kurzweil keyboard that I was forced to learn how to play when I was a child. I remember hearing first hand from my dad and his friends about what was happening. Later on in my undergrad biz school I still had some text books that was written around the boom. Everything was about the new "information highway" and how the "long-tail" will finally be serviced. People were giddy and it being the end of 2017, it is safe to say they were all right to be giddy. I buy a majority of my stuff through apps, able to maintain friendships across the globe and taught myself everything my dad tried to teach me about linux, when I was a child, now online while at work. Being able to freely create a currency that has the necessary legitimacy to actually work while still being able to cleaning integrate with a larger organization is a powerful weapon against getting screwed by globalism and these massive multi-national corporations. Where I call home is a former mill town that got fucked. Having a solid local currency that all the local businesses will recognize will make home much stronger. For this to reach it's potential though, there needs to be massive investment and social change - just like tinder needed fb, websites, emails and fast internet connections to reach a point of maturity, these new digital currencies need a full ecosystem. I don't buy or sell any of these currencies even though it would be ridiculously easy for me to do stuff that would be terribly illegal with stocks. It's because I think there will be a spectacular crash in the short run but in the long run the next FANGS will related to the blockchain and crypto technologies. So hate at your expense.
• tjtang 9y ago
  The similarity is GREED. People invest in a bubble, despite knowing it is a bubble, because they want to make money. And they are willing to take the risk to do so. Why not, when you can invest a small amount of your net worth and make 2-10x returns in a matter of months? The only problem is nobody knows when the bubble will burst. Bitcoin like Boo.com, Pets.com, WebVan, etc. were first movers, had good branding and promised disruptive models. These all have value, but were overvalued because the main motivation was to make money. Just like how the main reason to buy Bitcoin now is to make money.
• parmgrewal 9y ago
  * The people don't understand it. Check * Everybody just wants a piece of it no matter what. Check * Companies that have nothing to do with cryptocurrencies are trying to associate themselves with it. Check
• nextweek2 9y ago
  I have lived through the dotcom and there are massive parallels. Throughout the 90s everybody was talking about why they would need the Internet when they have tv and newspapers. Then from '98 to 2000 hyper and hysteria kicked in. Ridiculous funding happened and businesses really started doing irrational things because they thought they'd have their lunch eaten. Everybody new the dotcom bubble was going to pop and it did over the course of 6-12 months. Calling bitcoin a scam or ponzi scheme is really not fair, it dismisses the underlying utility of blockchain. Look at the tech of Ripple, their performance characteristics are aiming at the VISA and AMEX of this world. Bitcoin is turning into the reserve currency of crypto-coins, there are lots of alternatives which better serve day to day transactions. The real point I am trying to make is that right now it feels like we're in HTML 2.0 days and bitcoin is Netscape Navigator. New finance companies are going to spring up over the next few years, in about 5 years they'll start eating into traditional banks. Those banks and institutions will start panic buying. Nobody will know who the next Google/Facebook of the finance industry will be and thats the risk right now. Regarding the price change, you have to be careful. It's not a fiat coin backed by a government, so it's value is purely based on what the guy next to you will pay for one coin. On that basis bitcoin is very risky because it's value to you is $16,000 but your car mechanic thinks it's worth $0.