I like the tech but what worries me, as I said before, is that Bitcoin has no yield. Nor does any cryptocurrency (yet! AFAIK). In order to make a gain someone else has to buy from you for a higher price (greater fool). When the tech is young and new I think that's acceptable, I said this when Bitcoin was sub $100, but as more people jump in I think this justification becomes poorer. Paired with advances in blockchain elsewhere I really scratch my head with the current Bitcoin price.
Price comparison to historic bubbles
So whether people agree with labelling Bitcoin a bubble isn't so important, but it is certainly interesting to compare the price performance with bubbles from the recent past. Over on the ZeroHedge website someone has done just that:
http://www.zerohedge.com/news/2017-11-03/investing-bubbles
While ZH is notoriously grumpy they do often have interesting pieces that provide much food for thought. Looking at those graphs should make people pause and re-consider before reconsidering.
"Shoeshine boys"
For me, we have passed the "shoeshine boy" moment. For those that don't know this story I'll repeat what is stated on Wikipedia:
In the winter of 1928, Joe Kennedy decided to stop to have his shoes shined before he started his day's work at the office. When the boy finished, he offered Kennedy a stock tip: "Buy Hindenburg." Kennedy soon sold off his stocks, thinking:
“You know it's time to sell when shoeshine boys give you stock tips. This bull market is over.”
A timely move considering that the stock market would soon resemble the fate of the airship Hindenburg itself.
- Source: Great Depression @ Wikipedia
Back in 2008 I had to take my car at the time to a mechanic for repairs. One of the mechanics there told me he was following the stock market and was interested particularly in Tesco: a good company that should be safe. While I agree that it is a solid company and probably do fine over the long term it did make me think of the "shoeshine boy" story. Mania has taken over rationality when you are given investing tips on the street.
I'm seeing repeated occurrences of this happen all over social media. In the modern world where people are connected globally and information flows easily and quickly there it is perhaps not unexpected that people from countries and strata of societies are becoming knowledgeable about cryptocurrencies, but we have come a long way since I first heard about Bitcoin back in 2010.
Network effect
"but but the network effort" is not an investment thesis. At least, not any more. There is definitely something that can be said about buying into exciting projects and technology early when the prices are low but implicitly there is a notion of the technology being "unloved" and mostly ignored: hence undervalued. That was was once the case with Bitcoin, but I don't think it still applies
Professional scammers
As with any financial boom there are always the professional scammers who make money out of parting the naive with their hard earned cash. Unfortunately, it is also easy to tell folks to avoid this but in reality nothing can stop people once greed takes over. I'm not immune to the psychological battles of investing, but I have seen the problems enough times that I'd like to think I'm less hasty than I once was.
For evidence of scammers, let me drop this link to the Financial Times:
‘If you follow us you will make money’: how bitcoin is marketed to the masses
Maybe it isn't time to sell your holdings but I'm disinclined to buy more. If I was to buy anything I would look for something unloved but with good potentially. Granted, that is always easier said than done.
Caveat Emptor!
Thank you for posting
Addendum: I should add that some coins do offer a yield, or at least purport to. Dash and Zen being two that come to mind. They offer, or will offer, a yield for running a master node / secure node. When polkadot launches it will offer a yield too.
If we accept airdrops as a form of yield then those would count too; however, I don't know how spendable those airdrops are. If they aren't tradeable then I would value them at zero.
liked the story about the shoeshine boy, I didnt know that. It is exactly what is happening in social media right now with the herd coming in. unfortunately also the unregulated nature of the entire cryptoworld will likely leave a lot more people empty handed if it does pop any time soon. though I have little doubt it will rise again so long as the Dev's do not scupper the code and make more than 21 million coins possible. Dev issues are also a threat to Bitcoin longer term if you have followed the 'war'on the Reddit sites its been pretty ugly in what was once a community banded together. There is some interesting natural occurences been appearing in the ecology of Crypto as it has grown. I still think it has potential to make a lot of people rich but ruin a much larger number of uneducated gamblers who think it an investment that cannot fail.
Thanks for the comment.
I'm not worried about the lack of regulation. That was part of the appeal and why Bitcoin even took off in the first place. In an 'industry' where regulation is lighter then it required more due diligence on the part of the participants. I'm perfectly happy with this. However, the nature of greed is that many people won't look before the leap.
The dev situation with Bitcoin is worrying. I have limited interested in it now, and haven't had for a long time. I still think it is the best place to start learning about blockchain. If you can't understand Bitcoin and how it works then you will struggle with everything else. However, I do point people towards other projects if they ultimately want to get involved.
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