Crypto Markets Are Exploding! Can the Market Keep Up? - Revisiting: A Note of Consensus in this Time of Cryptocurrency Chaos
I want to take a look back at this post as ETH skyrockets past 60USD in the wake of the 300 Million USD Gnosis crowdsale.
I am going to blatantly open with a central assertion: we are in a bubble. There is a lot of new money pouring into crypto right now; the magnitude of investment in digital assets is much larger than that of the actual understanding of the technology - or that of its functionality for that matter. This imbalance is eventually going educate the investors. When they lose their money they will mature fast. The problem today is they aren't losing their money, projects with little to no innovation are carving out multi-million dollar markets and nieve investors are making outrageous returns.
There is a fund it first, build it later mantra that is completely unsustainable especially with these ICOs or initial coin offerings. There are so many startups in this space funding themselves with this format, the ones with actual value are few and far between. I am not going to bless any project specifically but I will say that there will be a clear-out. This will be a very healthy thing for this industry. When the investment drys up and investors become much more conservative, that is where the strongest projects will endure.
Looking back at the fundamental concepts of decentralization this space is built atop, those in it for the long run need to look past the get-rich-quick-schemes and focus on ensuring the decentralizations and freedoms we all were looking for in the first place remain.
Gnosis ICO
I mention the recent initial coin offering of the Gnosis project GNO token because it represents exactly one of the issues with uneducated investors. In short, without a product to show, the Gnosis team's ICO format combined with uneducated investors resulted in an extremely inflated initial valuation. Even worse, this resulted in only 5% of the GNO tokens being distributed to the community - the other 95% went to the developers (they have time locked the funds for a year). You can read more about the ICO and the issues here.
The Gnosis project may very well be worth 300 million dollars, but the current investors are not educated enough for accurate valuations. Investors continue to be swayed by a strong fear of missing out.
**10 days ago: **
Cryptocurrencies are exploding; as the market caps of these new assets rise, it is important to keep in mind the fundamentals that created this space in the first place
If you are just reading up Bitcoin today, you would be overwhelmed by vocal disagreement on the two conflicting subreddits, personal attacks on twitter by prominent members of the community and the slow... freaking... blocktimes...
consensus freedom
This chaos may seem very concerning, especially given Bitcoin's position as a store of value. It is important at this time to see through some of the tweet-storms and disingenuous blogposts and remember the resilience and freedom cryptocurrency is able to provide. There is a reason that despite the many issues, Bitcoin is still Bitcoin. Hypothetical attack vectors aside, a cryptocurrency is by definition, at the mercy of its user's consensus -- if someone stole every Bitcoin in existence in a single transaction, it could be inferred that the consensus of the users would be to return their funds; if all the users come to consensus, the thief doesn't matter -- this scenario seeks to demonstrate the user's control when it comes to cryptocurrency and how little someone else can influence the protocol.
If you are new to cryptocurrency, don't let this fighting and rhetoric scare you, it is that which the blockchain is resilient against. Although the math and code certainly protect us users, it will be important to resolve issues with more maturity if we would like to remain agile with progress. The following quote from Vitalik does this point justice:
One of the worst aspects of crypto culture is the idea that because math and code are supposedly apolitical, we do not have to be polite.
-Vitalik Buterin
beware of the shitcoins
There are lots of scams in the cryptocurrency space. With all the new money flowing into the current crypto bubble, now more than ever it is important to beware of the shitcoins.
If you are a newcomer to this space, looking at a "CoinMarketcap" list of every random coin and their 500% returns is a very tainting window to the real innovation happening. There are hundreds of bitcoin-like tokens that can be traded and speculated on, maybe a dozen or two are projects with real prospects and development. You might be easily dazzled by #Burstnation posts or the Mooncoin runup, but these projects don't represent the same innovation or market penetrability that made Bitcoin a success.
There is a reason you see here on Steemit, frequent posts by the same individuals promoting an obscure altcoin: they are trying to keep a market around to legitimize this token they own. Except that token is a copy paste of the open-source Bitcoin code where you can only mine with hard drives or something ridiculous. These are pure scams. The developers make a small change to Bitcoin and then start their own blockchain, they do most of the mining at the beginning while they promote the heck out of it. Once momentum dies down, they have hopefully sold a bunch of useless tokens to idiots who buy them thinking it will be the next Bitcoin. /scam
The most important thing that you can do is weather some of the fighting and research the project you want to invest in. Who are the lead developers? Do you agree with their mission? Did the coin emission look fair? Do the developers hold a significant portion of the supply (see Dash)? These are some of the questions you should be confident in the answer to before investing in any of the projects you read about.
Beware of the propaganda
Stay decentralized,
Kyle
I strongly disagree. It's simple, it's all about maths.
The total crypto marketcap is $35 billion right now... See how much FIAT money and not only are out there http://www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18 Our "bubble" is so tiny next to the USD bubble that is like a non existing market ... So i will make the opposite to your prediction that the altcoins will get pumped hard the next years... (Of course with much up and downs between, of course it will not go straight up)
Saying we are in a bubble does not mean that I think the market cap won't grow. Altcoins are going to be pumped to the moon for a while, regardless if they have a utility, novelty, community or developers. When investors realize that their latest VIVAconomy investment has nothing to show for it, they will be more conservative. A lot of this does not apply to projects with established utility like Ethereum, Bitcoin and Monero. These projects have a decentralized development and widespread integration; unlike many altcoins - they will endure most of investors impending conservatism.
I hope you are right but the appearances (in terms of people investing recklessly) are very much like a bubble.
Crypto is the future for sure and a bubble is not going to stop it, but it will slow it down when it pops.
The same thing happened with the dotcom bubble and the internet.
The internet is stronger than ever but that does not mean the bubble didn't occur and that it was not a massive setback.
There is no harm in exercising caution and judgement.
everithing is peramidal. it time will collapse. thak you for post.
Certainly. There are some worthwhile projects, let the free market decide what will prevail.
Well done - good article! I agree with you in most parts. At one point there will be a combing and only strong ideas/concepts with strong dev.team will suxeed. Many of the 725 coins out there are ridicolously uncreative, with no innovation some, as you mentioned, mostly hype & promotion. I wont cry if only 50/725 are left in 20 years aslong as survivers include my long term investment mix BTC,ETH,LTC,LSK,GNT.KMD with investment volume flattening from left to right . . . I can live well without hill-ary coin or INSANE COIN even if the prize expldes right now for no reason!
I'd even go as far as to say I don't think 5 of the projects going hard today will make it 10 years.
Market caps of crypto are still small to some other things in this world. So we shall see!
They sure are. That absolutely does not mean there is not a bubble. .com bubble, no one argued that the internet was going to explode in market cap in the future. All the dumb money flowing to any .com startup and their mom caused a bubble, which popped and allowed the leaders with good tech to prevail. All the vapor ware will vanish given time.
Duh the market caps of cryptos will grow, there will still be a bubble.
Yes, I expect there is somewhat of a bubble... being blown up in part by a growing lack of trust in conventional banking systems. In time, I expect things will sort themselves out as the alt coins that actually have "something" stay around and those who don't end up being worth fractions of a cent per coin.
Steem/Steemit is looking pretty good these days; here we actually have some "differentiation" in that the social blogging venue offers an "economic reason" for Steem to exist... and I'm sure there is more in the pipeline. Not something a lot of the highly speculative coins out there can offer...
I would actually disagree; there is certainly a lot of money entering the space for that reason but I would say that that is not what is contributing to the overvaluation. Those who are investing in this space for the long run (those who are convinced by the security and governance) are going to be here through the bubble. I am targeting investors who don't understand what exactly are investing in other than their last investment's 300% returns.
This is a good article, but I doubt your assertion that we're in a bubble.
This is new technology with innovators across the board and it's the first time we've ever democratized the financial sector.
This means that it's now easy and accessible for people to experiment with economies and this is reflected in the various coins that you're seeing. This experimentation is exciting.
The value of any money though is what you can buy with it. As long as there are easy on and off ramps, and the developers are doing all they can to make the currency solid, stable and reliable, this isn't a "bubble" that will burst because it's just money flowing out of the old guard of finance and into the new.
That said, don't invest more than you can afford to lose into anything whether it's cryptos, stocks, real estate or whatever.
The very reason you are making comments like this is because we are in a bubble. Every shitcoin and their mom's developers say those same things.
No, I say it because it's a reflection of our markets.
We've had a couple of people sell, the market is there. Most early investors have made between 10x and 100x. If they were going to try to sell to lock in a profit, now would be the best time to do it. But they aren't, because they're interested in the business aspect of this.
A VIVA Crown isn't a currency in and of itself. It's a digital asset that confers specific rights within the VIVA Ecosystem.
My opinion is that makes VIVA dramatically different than any other coin.
I'm curious to know what coins wouldn't be shitcoins in your book.
I mean it sincerely, what coins do you like and why?
Going back to your original topic and sorry for the thread hijack. But you've offered no support that we're in a bubble. The only thing you can point to is the price. But current prices don't tell the whole story. For example the price of real estate in the USA is already back to 2007-2008 levels. Is real estate in a second bubble? No, it's that inflation has finally caught up to the money injected into the system during the crisis.
You need to go back to the drawing board and ask "what are the motives".
Why are people buying these currencies?
It seems like a lot of these are being bought up by people who were in the mainstream financial sector and have decided to come over and see what all the fuss is about. People for whom a million dollar buy is just a line item.
The entire marketcap of the entire crypto scene is still lower than the market cap of say Google, or Apple. This tells me it's not a bubble but healthy growth.
You're running around like chicken little saying the sky will fall, and yeah it probably go down a few percentage points. It could stand a correction. But that's not a bubble, that's just a healthy market.
I don't have time tonight to outline everything in a way that will explain my point. I urge you to watch this video
~10 min that does a good job mentioning many of the points I would be making.
To answer quickly, the only projects with my blessing are Bitcoin, Ethereum, Monero, ehhhh Steem (hate the launch, like the product)
Sorry I missed this earlier. I think you are right.
Very good blog. Thanks for bringing this to my attention. Blockchain is the fututure but how are we gonna kill all those scamy cryptos out there? I found this amazing platform: https://www.coincheckup.com The site is my go to place for crypto investment analaysis and indepth coin research.