Are we in a bubble?
The crypto market has sailed over $80bn, and we now have seven members of the $1bn club. Bitcoin is at new heights, Ethereum is at new heights, nearly every coin has hit new highs.
When markets move so fast, there is always the fear that we are in a bubble, and when a bubble pops, it can be bloody. Panic leads to further panic and prices can crash heavily.
Bitcoin experienced a Bubble in 2013 when the price accelerated from $100 to over $1,200 in the space of a three months before spectacularly crashing. The priced settled at just above $200 in late 2015 and has been on a bull run ever since, regularly reaching new all-time highs.
I have written about this before; I think the market conditions are very different from 2013. The last crash was fuelled purely by price speculation against a single coin which most people did not understand. Of course, the current run is driven by price speculation, but we now have a wide ecosystem of different coins attempting to solve critical technical issues, as such these coins have real economic value. Ethereum is changing the way companies do business. SA coin is creating a decentralised file repository. Musicoin is bringing transparency and fairness to the music industry.
And so on, I can list so many different coins and what they are attempting to do. Yes, there are some shit coins, Bytecoin is almost certainly a scam, Dogecoin has no real purpose, it only requires a little research to find this out.
Why am I invested in the majority of the top 50 cryptocurrencies but not in Ethereum Classic, Dodgecoin, Bytecoin and Tether. Just do your research, you will soon find out.
So are we in a bubble? Almost certainly.
Is the market overvalued? My honest opinion is no. We are at the early stage of a financial and technical revolution. Dramatic right? But I am serious. Japan has led the way with the legalisation of cryptocurrency as a form of payment, and the market in Japan has accelerated, other countries are working on their legal framework for crypto. If you compare the cryto market to other markets such as stocks, bonds, gold, then it is evident the crypto market is still in its infancy.
This article in the Economist, questioning whether we are in a bubble is worth a read:
The conclusion: "On the other hand, although it is now easy to buy crypto-currencies for real cash, selling significant amounts can be hard—as the woes of Bitfinex and others show. This makes sudden outflows unlikely. And the price surges have demonstrated how the crypto-currency system is no longer just about bitcoin. Although it is still the biggest kid on the blockchain and functions, in effect, as a crypto-reserve currency, it now makes up under half the combined market capitalisation of all crypto-currencies. Come a crash; they may not have all fall."
The last sentence is key.
So, to conclude myself, yes we are in a bubble, where we are in that bubble I have no idea. We could be at the start of the bubble, and it may run for two years. We might be in the middle of the bubble, but we are certainly not at the end of the bubble.
Any crash for me will be short term, potentially a bubble in a bubble. Yes, I did just say that.
If the market does crash then what will I do? Probably nothing. I have always stated I am investing for the long term, 5 - 10 years. I firmly believe that my current portfolio will be worth more in 5 years than it is now. If there is a pop and I was to panic sell, it might be a small pop, and I might have to rebuy at a higher price.
If the market pops, I will probably take a month off, ignore the news and check back later to see if it is over.
If anything, a crash will be an opportunity; it will tell us the coins which have real value and those which don't. The shitter the coin, the heavier they will fall. The better coins will be a buying opportunity.
Should you even listen to me? This is up to you, I am not claiming to be an expert, I might just be getting lucky, but my portfolio is up nearly +600% for the year, and I am starting to be able to read the market. Looking back some of my tips have looked good.
Remember, do not invest anything you can't afford to lose, do not make emotional decisions, do not panic and get used to big price swings.
If this kind of investment is causing you to panic, lose sleep, sweat, etc, then it is not for you. Find something safer.
Any questions, then please give me a shout.
Big love x