
Lessons I Learned from the Dotcom Bubble for the Coming Cryptocurrency Bubble - nestorp
http://continuations.com/post/161091248805/some-lessons-i-learned-from-the-dotcom-bubble-for
======
jonnathanson
Respectfully, I think a lot of comments on this topic are missing the point of
the author's advice. Whether there is or is not a bubble, and if there is, how
big that bubble might get, are irrelevant here. That's not what this article
is about.

First, the author assumes there _is_ a bubble brewing. That's not his thesis;
that's his background assumption. His thesis is that, _assuming there is a
bubble_ , you should do X, Y, and Z, and not do A, B, and C.

So yeah, after reading this, we could argue once again about whether there's a
bubble or not. But the more interesting argument is about whether his advice
is sound. Not whether his assumption is sound.

~~~
yamaneko
One of his advices is:

> 2\. Beware vanity metrics

Can we tell if BitCoin and other cryptocurrencies has any vanity metrics? If
so, what would that be?

My uneducated guess would be how valuable the currency is in Dollars. The
currency seems virtually inflated as we don't know how much of that would
translate to real purchasing power. It doesn't seem that it would be possible
to many people to sell it all out. Thus, who invested in it would be supposed
to keep using within the coin's network, and given that a transaction takes
awhile and there are not many shops accepting it, it would be hard to get some
return.

In addition, BitCoin has fluctuated a lot since 2012 and there were several
issues in its way, like the lead maintainer stepping out, capacity limit being
reached because of block chain monopoly, Mt Gox bankruptcy etc.

~~~
throwaway41597
Current vanity metrics seem to include "market capitalization" and amount
raised during ICO. It is true that those have become signal in the current
noise but it speaks about how frothy things are.

Crytocurrencies simply are hard to value because you don't know how many users
they've got.

------
Ologn
The difference is the dot-com stocks had some theoretical value - even
Pets.com, people buy pet supplies online after all.

Unlike commodities, equities and so forth, cryptocoins have no value
whatsoever. So to try to make it sound like it has worth, its pushers have to
cast about for anything they can and finally come upon the only thing they can
- the dollar. In fact, they say, it's even better than the dollar.

It would take too long to explain here why the Bitcoin is not like the only
thing they have left to compare it to, the dollar. Also, an explanation won't
sway anyone who has already had a drink of the kool-aid any how.

May I recommend another message board for all those high on cryptocoins here -
4chan (
[http://boards.4chan.org/biz/catalog](http://boards.4chan.org/biz/catalog) ).
4chan /biz/ is filled with uneducated, poor kids all looking to get wealthy
with little work on the cryptocoin get rich quick schemes.

I think it's a much better message board for all of you of this bent. Here on
HN there are still some people who believe in studying math and science and
engineering and CS at universities, and then going and doing a lot of hard
work and creating wealth. 4chan is mostly filled with your types - the get-
rich-quick scam artists. Go read 4chan /biz/ right now - it's filled with no
work, no study, get rich quick types like yourself. Leave and go there. HN
will be stuck with those "out of it" old fogies who actually believe in study,
hard work, that commodities need value to have worth in the long-term, and
old-fashioned, out of touch ideas like that.

~~~
jpatokal
Bitcoins are saving this Venezuelan guy's family from starving. I'm pretty
sure that qualifies as value:
[https://www.reddit.com/r/Bitcoin/comments/6d2w1b/bitcoin_is_...](https://www.reddit.com/r/Bitcoin/comments/6d2w1b/bitcoin_is_saving_my_family_from_starvation/)

This is not to say that there isn't an absurd amount of hype and froth right
now, but if nothing else cryptocurrencies will continue to serve a purpose for
anybody who needs to send money outside capital controls.

~~~
sanswork
If you read the thread you find out that the Venezuelan guy lives in the US
has never done what he described and knows no one who has used it as he
described.

He gets called out by someone in Venezuela here
[https://www.reddit.com/r/Bitcoin/comments/6d2w1b/bitcoin_is_...](https://www.reddit.com/r/Bitcoin/comments/6d2w1b/bitcoin_is_saving_my_family_from_starvation/di0etdc/)

~~~
rayuela
See this is why I really appreciate this community sometimes.

------
chamza
Internet companies during the dotcom bubble had market value of several
trillion dollars.

The total market cap of crypto-currency is still only ~$70 billion. I agree
with the principle, but this boom is still pretty modest.

~~~
coolspot
I think it is not absolute value what defines a bubble. It should be relative.
E.g. perceived value of an asset compared to it's real value/revenue/growth.

~~~
dmichulke
To provide a context here - one of the key value propositions of BTC is real
interest rate.

Cash real interest rate: 0% interest - 2% inflation through debasing currency
= -2%

BTC real interest rate: 0% interest - 0% inflation = 0%

Note how _this_ benefit of BTC is _not_ bubbly by itself (growth expectation
usually is - due to it being based on past growth)

~~~
runeks
Prices only remain flat (0% inflation) if no increase in productivity occurs.

2% inflation doesn't mean the currency has been debased by 2%, it means: if it
has become _x_ % cheaper to produce a basket of goods -- and the price of this
basket of goods has increased by 2% -- the currency has been devalued by
(2+x)%.

Producers are constantly competing to cut the costs of production, in order to
gain market share at the expense of competitors, so I don't see how flat
prices can be a reasonable assumption.

~~~
dmichulke
Increase in production increases supply, so prices fall -> deflation.

Yes, inflation can have other reasons than debasement (for example,
productivity _decrease_ ) but this affects both types of "money" \- fiat and
bitcoin, so I left it out to keep it simple

------
kevando
Does anyone think that when the crypto bubble bursts, that will cause a stock
market level crash?

~~~
olavgg
Not really, but the crypto currency community looks like a pyramid scheme.
First users gets most of the coins.

~~~
product50
Do you have any idea what is going on here or are you ignoring away in bliss?
This is as much a pyramid scheme as VC industry is in that early investors
make disproportionate gains (and losses). Finding the right tokens to invest
in is the challenge.

~~~
Twisell
Well I will gladly change my mind anytime someone can provide a convincing
argument against the "bitcoin pyramid scheme" that is nor an ad-hominem
attack, neither a cryptic response like "value come from scarcity induced by
the growing complexity of the arbitrary mathematical problem solving that
require big amount of current tech silicium mostly running in a non-democratic
country who don't care about power efficiency...(goes on with technical
gibberish)"

My theory is that if MasterCard roll-out a "masterbyte" crypto-currency that
can automagically convert to real cash usable in all MasterCard enabled
retails, bitcoin will loose all value almost overnight. Prove me wrong using
strong arguments and I'll change my mind.

PS: needless to say, downvoting me don't count as an argument. It just keep me
thinking that you are in lack of a better one.

~~~
RandomInteger4
Your statement indicates that you don't know what a pyramid scheme is, or that
you do and you're expanding its definition to generalize its negative
connotation to something else that doesn't fall under the proper definition of
a pyramid scheme.

A company using credit card technology in combination with bitcoin and other
cryptocurrencies is simply leveraging existing technology interfaces for
companies that want to accept cryptocurrency without said companies having to
deal with alternative payment systems. The payment system handles everything
related to the cryptocurrency and the payee simply sees the USD (or other fiat
currency) value in their accounts.

~~~
Twisell
I will stick to the pretty basic definition that a pyramid scheme cannot
sustain itself when less foreign currency enter the system. That is because
the system is blatantly unable to produce value and only produce virtual
currency from foreign currency.

I stil don't see any argument, just as-hominem as usual when defending
bitcoin: "Pheeww you know nothing...".

------
1001101
Glad I sold my Amazon stock in 1999.

~~~
wmf
1999 wasn't a bad time to sell Amazon stock, actually, since it got punished
in the bust and took years to return to 1999 levels. But Amazon is a huge
exception because it was a real company and most dotcoms weren't.

------
learc83
If governments start to actually fear that their monopoly on creating currency
is in danger, they will destroy crypto currency.

Bitcoin may be decentralized, but they can go after currency converters. They
can make holding it illegal. They can make mining it illegal. They can make
trading it illegal.

They can manipulate the market to crash the value of bitcoin with (to them)
pocket change.

~~~
typednothing
> they can go after currency converters

Only in their own jurisdiction. The US already goes after those, but it won't
help as long as other countries don't.

> They can make holding it illegal.

Unenforceable. Making the knowledge of a secret key illegal would simply be
weird. Bitcoins have no physical incarnation. So, you cannot "hold" them in
your hand.

> They can make mining it illegal.

Unenforceable. It is very easy to hide that a machine is mining. Furthermore,
such machines can be located in any country of the world.

> They can make trading it illegal.

They already try to do that. It doesn't help.

> They can manipulate the market to crash the value of bitcoin with (to them)
> pocket change.

They would first have to buy up a lot of bitcoin in order to dump them and
crash the market. While buying up the coins, they are pushing its value up.
When selling them, they just go back to the point they came from. Hence, the
strategy would be totally ineffective.

What's more, if governments attack the internet, people will discover that the
reverse is much, much easier. Using the internet to orchestrate attacks
against the government, is simply trivial to organize.

------
Entangled
I will make a prediction so I can come back and make fun of myself in a month.
It is a bubble and it will pop real soon going down back to $500 bringing down
all the alts with it, then it will slowly go up again at a normal pace for the
next couple of years.

~~~
panzer_wyrm
Soo just the way it did three times already at different levels.

------
ufo
What did the cummulative registered users metric mean in the dot com days?

------
problems
Can we get this renamed to reflect that that is a cryptocurrency bubble and
not a "crypto bubble"?

It certainly isn't discussing companies working on cryptographic technologies
like I initially assumed.

~~~
dang
Ok, we added 'currency' above.

------
S410520
Don't borrow to invest in something? Ever heard of leverage? Such a stupid
argument. How about you talk about why that carries so much risk and teach
people something instead of this click bait shit

------
anjc
Sounds like you're conflating the value of the coins with the corporate value
being invested. Corporations are dedicating a desk or a lab or a few staff to
Crypto. There may be a decrease in the value of coins but there's no bubble to
pop on the organisational side.

