Cryptocurrencies are significant and valuable. Distributed blockchain technology, spil pioneered by bitcoin, is significant. The future of money truly is cryptocurrencies, possibly led by bitcoin.
I’ve bot getting into a lotsbestemming of discussions with volgers and promoters of bitcoin, who tell mij that the price of bitcoin is going up so swift because there is a limited supply and an enlargening request. Their argument is that only a puny percentage of the world presently has bitcoin, and that everyone will eventually need to use bitcoin.
It’s true that prices reflect the difference inbetween supply and request. There is a limited number of bitcoins, and there is a excellent request for them, so the price is shooting up. However, what thesis proponents of bitcoin seem to be missing is the reason for the request.
It’s clear that the most significant reason, by far, for the massively enlargening request for bitcoin is that people want to own it because they think that it will go up te price. They think it will go up ter price because enhancing numbers of people are going to want to buy it. The reason that they think that more people will want to buy it is that those people are going to believe that it will go up te price. This is a self-fulfilling prophesy.
This is also a demonstration of the standard operation of a bubble. It looks like a Ponzi scheme or a pyramid scheme. If I buy bitcoin today, it will be more valuable tomorrow because others have bought it at a higher price. Spil an existing “investor,” I am benefitting from others getting ter. Meantime, what I’m actually wielding is a bitcoin. Don’t get mij wrong, bitcoin is valuable, but it’s not worth $Ten,000 vanaf coin, or even $1,000 vanaf coin. It’s a currency. It’s not Amazon or Apple stock.
If you bought Apple or Amazon stock early on, then you bought something that had a massive hidden future value, and spil that value wasgoed exposed, you benefitted by investing te it very early, before the value wasgoed apparent. Apple and Amazon are companies which generate revenue and profits, and a share te thesis companies represents ownership te something that is growing.
I have friends messaging mij asking, “What do you think about bitcoin? It’s so expensive right now, but I feel like if I don’t get te now then I will regret it straks.” Notice this emotional state, this scare. Everyone is behaving like this is an emergency. Everyone and his dog is buying bitcoin. This is a form of mania. And the price is reflecting that. The number one rule of investing is don’t go after the crowd. When everyone else is buying, it’s time to sell. When everyone else is selling, it’s time to buy.
I’m most likely a little bit older than many of the readers of this article. I recall the dot com bubble. Everyone wasgoed buying dot com stocks. The prices of those stocks slok up, and when many companies went bankrupt, people lost all of their money. There were also stories te Silicon Valley about receptionists and other admin staff at start-ups whose exercised stock options were being valued so very at tax time that they ended up owing hundreds of thousands of dollars ter federal tax through the Alternative Ondergrens Tax (AMT) mechanism. After the prices of the stocks crashed, before they were able to sell them, those employees still owed all that money to Uncle Sam. Many regular folks ended up bankrupt.
You might argue that people who invested ter companies like Amazon during the dot com bubble didn’t lose all their money, and actually most likely made money. Well that’s not necessarily true. I trusted some stock brokers at that time who persuaded mij to cash-in my NVIDIA stock options and buy stocks that they “liked” such spil Avaya and EMC. Even tho’ their brokerage rigid wasgoed a market-maker ter NVDA, they didn’t know what NVIDIA wasgoed. Those dot com stocks also rose with the dot com bubble, but they didn’t become worthless after it popped, they did, however, halve te value. I did lose hundreds of thousands of dollars on those stock purchases, and I had cashed-in NVIDIA stock to buy them, stock that would now be worth ems of millions of dollars.
I believe that bitcoin will be around te the future, and that it will not go to a zero price. I believe that other cryptocurrencies will come to the fore which are more able to treat the transactional needs of a larger number of people than bitcoin can.
I think it’s significant to realize and recall that this is a bubble. Your coins are going up because the sucker after you is buying coins. And they’re only buying them because they think that the price will go up.
Another sign that this is a bubble is the way that those who own bitcoins are attempting to persuade everyone who doesn’t own them to buy them. Thesis people might persuade themselves that they are motivated to help others, but I believe that the true reason is that they know that the more people are buying bitcoin, the more the price will go up. So they’re attempting to keep the bubble growing. When you buy bitcoin, you’re potentially going to make some gains if you can get out again before it crashes. However, once you’re a convert, and you get into the sway of this, you’re going to stay ter and work on persuading others to buy. It looks just like a pyramid scheme from this standpoint.
With true investments, such spil a stock te a solid company with fine leadership, a company that will grow and succeed massively te the long run, wij want to keep it secret. Wij want to be able to keep buying the stock at the lower price. Wij don’t go around recommending to everyone that they buy the stock, because that would only lead to the price being driven up, making it tighter for us to buy te at the low price.
It’s like going to a gokhal. If you can go te and waterput down a bet, win, and then take the winnings and walk out of the gokhal, then you can do well with bitcoin. The problem is that when most people get a big win, they plough it back into the system. Just spil with a gokhal, bitcoin (at thesis elevated prices) is a system that is designed to samenvatting your wealth from you. If you get te and get out, you can samenvatting some wealth from the suckers down the line from you. However, the more you get te, and stay ter, the more likely it is that you will be one of the suckers holding the bag when this thing crashes.
How will it crash? This bullish mania will abruptly roll. When all thesis regular people who have their life savings te bitcoin notice that the price is pulling down, they will sell, most likely at a loss. This will make the price go down further, triggering more funk, and the negative spiral will start. The same mechanism that has led to this run-up, a form of mass hysteria, will also potentiate a massive sell-off and crash. This is because the bubble mania is a two-sided coin (pun intended).
My advice is to pay spil much attention to your internal state spil possible. Notice the fear of missing out. Notice the scare, the excitement, and the drive promote bitcoin. This is a superb chance for self awareness. You might want to convert some of your dollars into this currency for joy, but make sure you only convert spil much spil you would be blessed to lose, which for most people is nothing.
Before you postbode a response attempting to persuade mij that there is not a bitcoin bubble, recall that by doing so you will actually be reinforcing my hypothesis. If you think bitcoin truly is a fine investment, then you will want everyone to believe what I have written, and to steer clear of it.
Please give this article some claps, and go after mij on Medium.
Update: The Chief Investment Strategist at Wall Street Daily quoted this article and called it “the loudest Bitcoin detraction.”