Bitcoin has exploded in the past 2 days, going up 50% in a short-period of time and nearing $20k on GDAX. This Bitcoin bull run has no real catalysts aside from arguably a Lightning demo, but realistically is nothing more than Bitcoin doing what Bitcoin does best: Rocketing to the moon.
Bitcoin and cryptocurrencies are, in my opinion, one of (if not the) most euphoric bubbles of all time. This doesn't mean it is the largest bubble - there have been many bubbles that are larger. Rather, the level of emotion involved has escalated beyond levels seen in most historical bubbles due to:
- The internet increasing amount of hype
- Younger demographics of those investing
- Amount of Retail Investors
- Libertarian feelings against government and central banks
Furthermore, the bubble is escalated even more by loose monetary policies which has increased all investors' risk appetites, resulting in additional capital inflows to this nascent asset class.
Note that when I call Bitcoin a bubble, I'm not saying you can't make money. On the contrary, I think it is one of the best opportunities to make money in a long time. However, Bitcoin is not WORTH even $10,000 in my eyes. You can justify the price of Bitcoin in four main ways:
- Transaction Medium
- Remittances
- Microtransactions
- Digital Gold
The video contains details on each. Briefly, here are my criticisms:
Declining current utility value as transaction medium given increased fees, clogged up network and clunky user interface (UI). Lightning will improve fees and speed, but UI will still not be idiot-proof which slows adoption. At max, $10b in current utility market cap from this. Hard to identify PV of future utility value, but doubt it is much given how long I suspect mass adoption will take.
Same as with its use as transaction medium - UI is not friendly and existing solutions will likely continue to be easier for the lay person.
Not even useable for MTX until future, but could contribute slightly to PV of future utility value today.
Not an inflation hedge like many people say, given much of volume is coming from JPY (deflationary) and USD (low inflation) at the moment. Bitcoin & gold seem to co-exist, not fight. Gold is more exposed to macro factors than Bitcoin.
All in all, I don't see buying Bitcoin right now as investing (ironic given my channel name). It is more speculation, which is a great game to play as long as you understand it is the game you're playing. "Hodl" can also end up with greed. Don't let people who call your actions "weak hands" bother you. Such actions can protect your downside. Best of luck to everyone in this crazy market.
Absolutely. Isaac Newton, one of the smartest people who's ever lived, managed to lose a fortune via FOMO in the South Sea Company bubble; that effect is amplified through the internet and a 24 hour news cycle. The under-informed masses don't stand a chance, it's up to the very few people like you to try to inject some reason into this hysteria.
Great points as always. Love to hear your insights - been subbed to your channel a couple weeks now. Keep up the good work!
Are you maybe CGP Grey? Your voice seems to be the same