
Why and how the Cryptobubble will burst - tmlee
https://medium.com/@dennyk/why-and-how-the-cryptobubble-will-burst-de9bc7fc5332
======
neals
It already burst a couple of times actually. Back with MtGox we had quite the
burst and a long period of decline. Or how about the 5 times China forbid
Bitcon? Burst after burst.

As with the internet: we continued to built it anyway. Adding value to the
network in our own way.

I have not stopped working with Blockchain technology no matter the price. I
went from millionaire to nothing back to multi-millionaire and I have just
kept on working. And I will keep on working, bubble or no bubble, there's
always going to be cryptocurrencies and cryptocurrencies-innovation and work
for developers and a nice people and fun projects.

~~~
bsenftner
As a developer of these technologies, you're in a completely different
situation than the investors. Crypto-technologies have obvious value anywhere
privacy is desired, but once productized as a virtual floating asset, the
value becomes much harder to quantify, and then the grifters appear. Seems to
me incorporating less privacy, a private side-channel for checks and balances
of sorts, is something necessary. But I'm not a crypto-technologist, just
someone with a graduate economics education, so my impressions may be
irrelevant.

~~~
lojack
Privacy is actually a common misconception when it comes to cryptocurrency.
More currencies, bitcoin included, are actually the opposite of private –
every transaction is completely public for everyone to see. There are
currencies (i.e. Monero) that aim to add privacy, but by and large it doesn’t
exist.

------
ggambetta
Just yesterday I saw an ad on the Tube[1] - "Buy & short cryptos" / "Copy
expert crypto traders" / "Invest in a crypto portfolio", and made me think of
cabbies giving stock tips previous to the 1987 crash.

[1] Pic here:
[https://twitter.com/gabrielgambetta/status/92678756736590233...](https://twitter.com/gabrielgambetta/status/926787567365902336)

[2] Turns out it was shoeshine boys and 1929
([http://archive.fortune.com/magazines/fortune/fortune_archive...](http://archive.fortune.com/magazines/fortune/fortune_archive/1996/04/15/211503/index.htm)),
but my point stands :)

~~~
charlesdm
At a market cap of $200bn, it's hardly comparable. In fact, it's not even a
blip in the grand scheme of things.

If this really is a bubble, current prices are cheap (imo) and it will head
into the many trillions of dollars. But that's me putting on my speculator
hat.

------
3pt14159
Disclosure: I sold most of my Bitcoin, and I own some Dash and Sia.

> cheaper at some point over the next 12 months is extremely high.

I agree with 85% of this post. Except two things:

1\. I think people dramatically underestimate the likelihood that Bitcoin and
all cryptocurrencies get completely banned. ISIL isn't ransoming civilians for
Bitcoin yet. They, or someone else will. Politicians and judges aren't getting
contract killed via cryptocurrencies yet. They probably will. Governments are
going to give people a choice: we're regulating you (signing transaction
reversal with a special US TREASURY key, say, or requiring real identities
behind addresses) or we're shutting you down. This even has precedent (eGold
in the 90s). I think Bitcoin has a higher chance of surviving this than
Etherium because it's less complex of a change.

2\. Just because you can call that there will be a Bitcoin pull back in the
next twelve months, doesn't mean that it will be less than the price _right
now_. Bitcoin has gone up a lot in the past 12 months and it can go up a lot
more in the next 6. If it crashes from $25k a coin to $5k a coin you aren't
really giving good advice for what to do today. Personally I hope it crashes
to $1k soon so I can buy back in. Feeling kinda dumb for selling at $6k CAD,
but it really could hit $50k before the pullback.

~~~
eof
> . I think people dramatically underestimate the likelihood that Bitcoin and
> all cryptocurrencies get completely banned.

I expect this will be almost as effective as the banning of narcotics, pirated
media, alcohol during prohibition, etc. It's far, far too late for this to
have a lasting effect (though certainly a short term reduction is price is
likely)

~~~
empath75
It won't be effective at destroying bitcoin as an effective currency for
illicit activity, but it absolutely would destroy the price, because you'd
only be able to trade it outside of major exchanges, and without interacting
with the american banking system, which would be _hard_.

~~~
dragonwriter
The utility of Bitcoin for illicit activity is very much related to the fact
that it can be then used in the legal economy. So, yes, an outright ban on its
use and exchange would impact already-unnecessary uses.

------
TYPE_FASTER
The startup bubble separated the companies with some value (Amazon) from
companies with no real value, or not enough to justify their existence.

It is challenging for me to separate rampant FOMO speculation from the use of
cryptocurrency as a currency (Zimbabwe), but I suspect something similar will
happen. The technologies and platforms that enable true digital currency use
will end up flourishing for the long term.

------
thisisit
This one is one hell of laborious read. Though on the top highlight:

> This is the reason why things like technical analysis work much better in
> crypto than in equities, because these markets are quite obviously more
> likely to be driven by fear and greed than established markets.

It works because as the author puts it " the field is made up almost
exclusively of newcomer retail investors that probably have never held a stock
in their life."

In which case, trading is mostly done by reading some _trading_ books.
Fundamental analysis tools like valuation etc. are quite vague and don't
really provide a simplistic "if a, then do b" answers. So, people turn to TA
which is much easier. If a significant amount of people follow it, then it
becomes a self fulfilling prophecy.

That said, author also seems to use TA as well:

[https://medium.com/@dennyk/trying-to-make-sense-of-the-
ellio...](https://medium.com/@dennyk/trying-to-make-sense-of-the-elliot-waves-
situation-in-bitcoin-at-the-moment-872f619b7302)

------
Shorel
From what I have seen, Bitcoin is not a single bubble.

It is a endless stream of bubbles, and I see no end in sight.

Each bubble bursts and after a while it starts bubbling up again.

So, yes, it will burst. Many times. But that doesn't mean it will be the end
of it.

~~~
saas_co_de
It also goes along with the stock bubble which is absolutely fueling it.

You have a bunch of people with inflated net worths from their stock holdings
who are being sold on Bitcoin as the "new gold" and a way to diversify their
portfolios.

~~~
cableshaft
Just wait until the stock market crashes again and investors need to exit and
park their wealth somewhere for awhile. I bet Bitcoin will be one of those
places that wealth will go.

~~~
saas_co_de
that is one way things could go.

the other is that when over-leveraged people who are living way beyond their
means see their stock portfolios collapse they are all going to try to
liquidate their crypto at the same time and so crypto will collapse the same
as stocks.

~~~
cableshaft
That is certainly possible. I've liquidated some assets before when I really
didn't want to just because I was going through some tough times financially.

------
mgbmtl
Seems to me mostly a (valid) criticism of ICOs, which are kind of like penny-
stock. No one would put all their money in a single penny stock, right?

It doesn't say much about buying stock in companies who have 'blockchain' in
their name. Many of these seem like traditional startups (and many will fail),
but can any of them provide fast growth? if not, any long term value?

Disclaimer: outsider point of view, I know nothing about this. I stopped using
Bitcoin when renewing a domain name would cost me $5 in fees for a $15
transaction.

------
Beejeepa
Sure, it will burst. The Internet Bubble burst. And here we all are.

~~~
charlesdm
But not before first going up to $5.6tn in value though, and then crashing
back to approx. $1.5tn. The entire crypto space is at $200bn now.. :)

------
warent
As an aside, it's interesting that Bitcoin can lose 10% of its value in a
single day, and the media/bloggers will use language like "slight decrease" or
"faded value" to downplay how serious that amount really is. (Bonus points for
"The price is stabilizing" when it dips)

If it were possible to short bitcoin, we'd be hearing a very different choir
(Edit: I was mistaken, it is possible)

~~~
lawn
You need to see it in the context. All cryptocurrencies are _extremely_
volatile and they routinely go up and down 10%. You simply can't compare the
volatility to the stock market where similar numbers would make blood flow on
the streets. Here it's almost business as usual.

------
chrisco255
There will be a shake out, no doubt. The more valuable question to ask and
answer is "which" cryptos will survive and thrive and "when" will this bubble
burst?

------
ryanmarsh
Amazon survived (thrived) the dot-com burst. I see no reason to believe the
same won’t be said of at least one coin. My money is on bitcoin and etherium.

------
csomar
Interestingly, the deflation that happened recently in ICOs and Alt currencies
seems to have boosted Bitcoin price (as the % share of bitcoin jumped)

While a bubble burst will affect most of the crypto, I wonder if crypto-
currencies will survive the effects differently.

------
cjbenedikt
"In the crypto bubble, the field is made up almost exclusively of newcomer
retail investors that probably have never held a stock in their life." Any
credible data source to back this up. Doesn't sound realistic at all.

~~~
charlesdm
It's not. Hedge funds have been moving in for a while, some institutional
money is getting ready to move in in the next 6 to 12 months.

~~~
cjbenedikt
Precisely my thoughts....plus HNWIs. BIG difference to dot.com bubble when
stocks were peddled by major brokers.

~~~
charlesdm
Honestly, I think it'll come. We're just not there yet (few years off)

------
1derful
Everyone knows that speculation is outpacing the current value of crypto, but
unlike the .coms of the 2000s, there is inherent long term utility in the
biggest cryptocurrencies. I can't tell what the true value will be, but there
is value in these currencies independent of the fact they are trendy
investments.

------
PatientTrades
This article fails to address the major question. Why and how are not
important. The only thing that matters is WHEN the bubble will burst. Nobody
can answer that question. My best estimate is around the 2020 election cycle
when regulation of cryptocurrency becomes a major issue

------
thinkloop
On the flip side gold has been in a 3000 year bubble without signs of
bursting. The value of gold is far higher than it's industrial/luxury demand.

------
gadhaa
can someone please tell medium.com to fix their certificates! Error code:
SEC_ERROR_UNKNOWN_ISSUER

\--firefox-- The owner of medium.com has configured their website improperly.
To protect your information from being stolen, Firefox has not connected to
this website.

\--chrome-- Your connection is not private

Attackers might be trying to steal your information from medium.com (for
example, passwords, messages, or credit cards). Learn more
NET::ERR_CERT_AUTHORITY_INVALID

~~~
mrpound
This may be caused by a missing intermediate cert on your machine.

~~~
tonyztan
Shouldn't sites be serving the the full trust chain, except for the root?

------
chaoticmass
I don't see how Crypto 'Market Cap' is in any way related to the term 'Market
Cap' as related to traditional stock.

------
jokoon
I wonder, isn't bitcoin much more power-hungry than other forms of currency?

------
xer
Bubbles are everywhere, one you probably never heard of is called humanity,
yes our species.

One significant fuel of blockchain tech is the distrust in the current
financial systems. If central bankers and governments could regain trust there
is a probable chance of a bust.

------
smokeyj
Blogger predicts bitcoin is a bubble. HN violently agrees. News at 11.

------
nnfy
I think many crypto-currencies (with and without ICOs) are rather obvious cash
grabs that provide no actual value beyond speculation (e.g. dogecoin); was
something comparable going on during the .com bubble? Were there many
companies offering no actual value and taking in cash?

Edit: I originally conflated cryptos with ICOs, and have since corrected the
mistake.

~~~
deadmetheny
Dogecoin was made to take the piss on Bitcoin, not as an ICO. The fact that
Dogecoin isn't currently worthless is a testament to how hilariously blind
people are to the bubble.

~~~
xur17
I made money buying and selling UET (Useless Ethereum Token) [0]. There were
open buy orders on an exchange for more than it was actively available for via
ICO for a period of about a week. So naturally I made a bundle buying and
selling it. In this case it was the confusing ICO terms that made it
profitable.

[0] [https://uetoken.com/](https://uetoken.com/)

~~~
deadmetheny
Impressive. I unironically applaud your success on making money off complete
idiots.

------
evil_rumsfeld
Bitcoin's bubble will pop and reform, but it's unlikely to completely burst
into oblivion.

------
kapauldo
Happy that there isn't much disagreement here. A rational consensus is
uncommon on Hn.

