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RE: Are we in a Cryptocurrency Bubble?
99% of the people around me laugh when I speak about criptocurrencies. There is nobody inside this new asset class. How can we live in a bubble if 99% of the people I know do not even know what is this blockchain technology about? I think you are confusing high volatility with a bubble. Of course we will see eventually a bubble, but it will be a bubble when your taxi driver tells you how good is buying bitcoin! That will be the time to jump!
I think you are mistaken. You don't need a huge number of people to make a bubble.
If it's a bubble it's only because the markets are immature and also because there is no way out of it. If you had 5000 ETH where would you put it if you wanted to make it generate a profit? Cashing out means 40% income tax.
Yes for sure - but I suspect those that are more savvy investors probably have some means to get around the regulations - particularly in non Western countries.
In non-Western countries yes, but Ethereum is very popular in Western countries.
It's popular everywhere now. I think if there was some big crisis the base ether token itself will likely be safe.
Right, but here I see involved in this "bubble" a little percentage of the world population, and I think thats too low having in mind that this technology is going to change almost ALL world population lifes.
Yes long term it will. Long term is irrelevant in bubbles. Look at historical examples like the dotcom bubble. The internet didn't go away - it still conquered the world but when the bubble burst times did become very tough and it delayed progress.
The bubble seems to be caused by over regulation, high cash out taxes, and lack of proof of stake or low risk interest sources. In other words an immature over regulated over taxed market is in a bubble because it's immature, over regulated and over taxed.
If the taxes weren't so high there wouldn't be so much difficulty in cashing out and there wouldn't be a bubble. But when taxes are 40% (income taxes) then you're stuck in Ethereum if you have a lot of Ethereum wealth unless you hold for 2 years straight for the capital gains rate.
Holding doesn't increase your wealth or generate any income. In fact if you just hold you lose wealth guaranteed due to Ethereum inflation which encourages people to put it into ICOs in the first place. Only proof of stake combined with tax exemption will fix this problem in my opinion.
If you compare with Internet adoption I think we are currently in 1993-1994. I repeat: still far far away from the bubble peak of 2000.
We will see. The psychology is what makes the bubble I think.
I don't think any of us believe we are nearing the point of saturated adoption. However as @thecryptofiend is saying, a bubble can be formed by a very small group. Look how shook bitcoin was with the whole Mt. Gox incident or the DAPP disaster with Eth? These were just external crisis driving price down.
Imagine what happens when a bunch of these token projects collapse into the vaporware that they are? It's going to take a while to recover major losses and it's also going to slow crypto and blockchain adoption.
But those events you are talking about are not bubble events my friend! That is just volatility. Normal and beautiful volatility that this kind of brand new assets provides. Those events were high volatility ones and provided wonderful buying opportunities. Of course we will see more 40%-60% drawdown, but they are only that: drawdowns that provide huge buying opportunities. The bubble burst will come but it is far far away...
I would define them as bubbles. I think you have a mistaken view of what a bubble is. This Wikipedia definition is talking about stocks but the principles are the same for anything:
In this case I would say for many of these tokens the financial price is way out of kilter with their utility value or indeed the amount of completed product behind them. They are often little more than a fancy website and an idea.
I think the hallmarks for me are overvaluation of a particular asset which becomes exaggerated as a result of human psychology and group behaviour.
It is not the same as volatility although volatility may be involved.
I have been prone to it myself and it is an intoxicating mix which tends to blind people to rational thought.
Interesting. And how about STEEM? Is STEEM in a bubble too? Would you recomend selling some STEEM and buy them after the "bubble" burst?
You completely miss my point - Steem is one of the few cryptocurrencies that has utility so is probably one of the safer ones - it is definitely not currently in a bubble. Last July is a different matter though.
I agree with you. There are few safe cryptos out there, and one of them is STEEM.
Not Steem, but the Steem Dollar. Steem itself isn't safe. Steem Power was once interesting due to the interest but right now it's too low. Only the Steem Dollar is a stable store of value.
I get what you mean here. For example if you had a token that represented the total index of the market, you probably are fine continuing to buy in and use things like dollar cost averaging. But the token market is its own animal and I think we can say there is a bubble going on there.
The vast majority of tokens are trash over there and will end 0: YES.
There will be huge volatility events with 50% more drawdowns: YES.
Using mean reversion algorithms prices are quite overvalued right now: YES.
There is a bubble and prices will be dropping for at least 4 months or more: NO.