
Are we in a cryptocurrency bubble? A comparison with the 2000 dotcom bubble - jimmygatz
https://medium.com/@zemacedo/are-we-in-a-cryptocurrency-bubble-a-comparison-with-the-2000-dotcom-bubble-a463d8dd8d8b
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more_corn
As someone standing on the outside, the massive boom in value certainly sounds
like a bubble to me. I'm hearing all the same stories: the newly rich buying
absurd cars, "my friend made x much". Eventually all the tourists who want on
will get on, then they'll start gettin back off.

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User23
The speculation about cryptocurrency valuations is a great example of how bad
people are at dealing with radical novelties. People spout meaningless
analogies, be they about decades old market crashes or centuries old
speculative frenzies like tulip bulbs, as if they apply here when clearly they
cannot.

~~~
jimmygatz
Appreciate the feedback!

Is there any example from history you think could be used as an analogy or do
you think there's no way of comparing this to anything that's happened before?
If so, how do you think about cryptocurrency valuation?

~~~
astrodust
This is the first time we've had a bubble around an asset with zero intrinsic
value. Even tulips, or "worthless" Weimar Republic bills had negligible value.

When Bitcoin implodes the value of your Bitcoin collectable merchandise will
vastly exceed the value of your BTC. Those physical coins will slowly increase
over time as their obscurity and notoriety grows.

~~~
jimmygatz
I hear this argument a lot and I'm never really sure what is meant by
"intrinsic value"? Why do you think bitcoins have zero intrinsic value but
tulips and weimar republic bills do?

Bitcoin has many uses, but for the sake of argument let's take its often
stated use of acting as digital gold. If gold is "intrinsically valuable"
which I presume you think it is, then so is bitcoin. Gold is valuable because
it is a good store of value due to its properties of being scarce, long-
lasting, easily divisible, transportable, etc. Bitcoin is all these things too
and in fact is a much better store of value than gold. I see no reason, other
than "brand", why gold should be "intrinsically valuable" but bitcoin not.
Btw, gold is a 3-6trillion dollar market depending on how you do the
accounting ([https://schiffgold.com/commentaries/just-how-big-is-the-
gold...](https://schiffgold.com/commentaries/just-how-big-is-the-gold-
market/)).

~~~
User23
Good luck transacting in gold, because it can't be done efficiently due to
assaying costs. You can transact in metal bars stamped by Credit Suisse or
another bank, or coins minted by some sovereign or other trusted authority,
but nobody in their right mind is going to accept plain gold for any
transaction. Without the imprimatur of some authority, it's simply not
trustworthy.

~~~
astrodust
When Argentina's economy collapsed people would frequently transact in gold.
It wasn't bars, but just junk gold, something that a simple chemical test
could prove was gold if necessary.

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wetpaws
Bitcoin chart is a fractal. Every single time in the history of it there is a
post about it being a bubble. $100, $1000, $3K, $4K, $10K, I keep seeing this
for yyyyears.

~~~
astrodust
There's a limit to how stratospheric this price will go because at some point
it will blow out so hard it poisons the whole Bitcoin economy.

If it doesn't happen before $100K I'd be truly astonished. The longer this
goes on, the higher it goes, the harder and faster it will crash. A lot of
people are going to be caught holding _nothing_.

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tfmatt
Allow me to save you sometime, the author basically sums it up with this:

    
    
        Conclusion: It’s obviously a simplified model and you can play around with the numbers and get marginally different results, but the key insight is that even if you’re a fervent crypto believer, if you think there is a nonzero chance a crash might happen then in order to maximize your EV (i.e. make the most money) you should keep some % of your money on the sidelines to invest once the bubble pops and lower your average buy-in cost. The higher the probability you assign to a crash, the more money you should keep on the sidelines and vice versa

~~~
_Chief
Sorry, trying to read this was so painful and time wasting on mobile.

For anyone else not interested in scrolling:

Conclusion: It’s obviously a simplified model and you can play around with the
numbers and get marginally different results, but the key insight is that even
if you’re a fervent crypto believer, if you think there is a nonzero chance a
crash might happen then in order to maximize your EV (i.e. make the most
money) you should keep some % of your money on the sidelines to invest once
the bubble pops and lower your average buy-in cost. The higher the probability
you assign to a crash, the more money you should keep on the sidelines and
vice versa

