Guides & Analysis

Why invest in Crypto? It’s a bubble anyway!?

By March 16, 2018 No Comments

bitcoin bubble

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The media loves it. Crypto is in a bubble; This is the next big Bubble; Remember the IT bubble?

Crypto might be in a bubble but, it’s a very small bubble at the moment. Compared to the internet bubble of 1999/2000 which saw 6+ Trillion US Dollar evaporate. The total Crypto market cap which swung between 300 billion and 800 billion over the last 3 months is still a relative bubble.

There’s are 5 other major differences if you compare Crypto to the 1999/2000 internet bubble. Reasons why crypto could and maybe should go way higher than its current relatively small market cap:

  1. Everybody can join and they likely will: your grandpa, the taxi driver and the hairdresser. You can open a crypto account in about 20 minutes. Opening a stock-account back in 1999 was a lot harder. Besides that, we didn’t have social media in 1999. Ever wondered why anything internet related can grow from 0 to millions or billions? It’s the internet and its social media. Metcalfe’s law* never grew so fast 🙂
  2. This crypto bubble keeps popping. And it’s a good thing! The cryptomarket with Bitcoin at its forefront has seen some major highs but also some serious downward trends, but, after every low, there were some new highs. This is a very healthy bullish pattern and actually doesn’t suggest that we’re in a bubble like for example the IT bubble in 1999/2000. At least, not yet!
  3. Attractiveness to the young generation, these youngsters out there, they are:
    • an internet generation – They grew up with the internet, they didn’t have to learn it.
    • an instant generation – If I want something I want it now (Netflix, iTunes)
    • and a social confirmation generation – If my friends have it I also want it, I can’t stay behind.
      Crypto ticks all 3 boxes for an easy investment for the young generation.
  4. The potential benefits of cryptocurrencies/blockchain can be way bigger than the internet. It can revolutionize the way we do pretty much anything. You can argue that the internet made our lives easier and more convenient. Which is great. The Industrial Revolution, however, made our lives (back then) completely different. Blockchain has the same potential.
  5. With some of the strongest cryptocurrencies, you buy into a protocol. What… a protocol? Yes a protocol! What’s a protocol?The internet is a protocol (TCP/IP). So is email (POP3 / SMTP / IMAP). Bitcoin also runs on it’s own protocol (blockchain). Think of, for example, Bitcoin as buying “the internet” in 1995. Nobody owns the internet, but with Bitcoin and some other cryptos you do own a piece of the blockchain by holding it’s cryptocurrency.

    People will use blockchains for many purposes and companies will build their businesses on it. Therefore they need to own cryptocurrencies on that blockchain as well. If people want a piece of this blockchain, and many will in the future, simply because they have to. The growth potential of some of these cryptocurrencies is tremendous and likely underestimated by many.

* Metcalfe’s law states that the value of a communications network is proportional to the square of the number of connected users of the system (n2). In other words, networks/communities etc can grow exponentially. Due to social media, this can happen in no-time.