4 Reasons Why Crypto Currencies Aren't in a Bubble!

This is an exciting time to be involved in the crypto space.

Coins like Bitcoin, Etherium, and most importantly Steem, have been Team Rocket blasting off into unexplored reaches of the galaxy. Excuse my excessive use of hyperbole, but the way crypto currencies have been performing in recent months, has skewed my understanding on what is considered an exaggeration or reality when it comes to crypto.

However, even the most bullish supporters of the crypto space have to admit the uneasy feeling manifesting from the massive growth that many of these coins have seen in this short period of time. It's important to consider the possibility that we might actually be in a bubble and prepare for the worst, which is why I wrote this post discussing the different phases of a bubble and where we might be, along with indicators in price to look out for, before the bubble is likely to pop.

I believe it's important to provide information from both sides of the argument, so I turned to Charles Smith, a financial blogger from oftwominds.com. Below are four key points on why we may not be in a bubble from Smith's interpretation on the state of crypto currencies.

1. Crypto Currencies Have an Authentic Purpose

Crypto currencies aren't like the admittedly addictive fidget spinners, in that they have a functional value - specifically,

They facilitate international payments for goods and services. - Charles Smith

Charles is not alone in this assumption. The Economist believes that Bitcoin is setting its sights far beyond beyond the title of digital gold, in that it plans to surpass all of the major currencies like the Yen, Euro, and even the dollar. This prediction isn't as far fetched as some speculators might argue, considering the steps that Japan has taken in legitimizing crypto currencies, specifically Bitcoin, and Ethereum, as legal means of payment.

2. Crypto Currencies Aren't a Scam

What constitutes a scam is providing a good or service whose value or function is falsely advertised, to obtain money or something else of value.
Smith believes that the primary crypto currencies (Bitcoin, Ethereum, Dash), are transparent in nature, in regards to the coin's purpose, rules for inflation, and risk involved when investing in a market that could lose all of it's value tomorrow. Smith makes a good point in that, when dealing with crypto currencies, "what you see is what you get".

While a Beanie Baby scam might use cryptocurrencies as a means of exchange, this doesn't make primary cryptocurrencies a scam, any more than using dollars to transact a scam makes the dollar itself a scam. -Charles Smith

Crypto Currencies Provide a Network.

According to TechTarget The Metcalfe law is generally interpreted in two ways,

1. The number of possible cross-connections in a network grows as the square of the number of computers in the network increases.
2. The community value of a network grows as the square of the number of its users increase.

According to Smith, this law alone can't explained by the rapid growth of crypto currencies, because it doesn't take into account the value generated by the knowledge and information contributed by the users of the sub-works (alt coins) that make up the entire network (crypto currencies as a whole). This interpretation is referred to as the Smith Corollary to Metcalfe's law.

In other words, cryptocurrencies are not just stores of value and means of exchange--they are networks. -Charles Smith

The larger this network grows, the more it's utility and value grow, which will lead to a larger adoption in the future.

4. Crypto Currencies Aren't Mainstream

Smith believes that,

The true potential value of cryptocurrencies will not become visible until the global economy experiences a catastrophic collapse of debt and/or a major fiat currency. -Charles Smith

Many speculators and financial analysts like Bitcoinist.net, agree in smith's belief that crypto currencies won't reach it's true potential in value and utility until a recession occurs, that is so bad that our modern financial systems cease to function.

Bubbles occur when everyone and their sister is trading/buying into a "hot" market. Bubbles pop when the pool of greater fools willing and able to pay nose-bleed valuations runs dry. -Charles Smith

We all have to realize that we are all still relatively early to the party and have a ways to go until we really start to see this space realize it's true potential. Smith believes that the key factor determining the formation of a bubble, lies within the influence of the big financial institutions. Once we see large hedge funds, insurance companies, and wealthy corporations start investing into the crypto space, we will most likely see a rise in value that will make many of us early adopters very wealthy.

If you found this post helpful in anyway, please up vote, follow, and comment. With that being said, keep on stemming on!

Sources: 1, 2, 3, 4, 5, 6, 7