Crypto currencies started gaining widespread attention when Bitcoin made its first parabolic move to $2,000 back in late 2017. It then exploded in popularity in late 2020 as it went parabolic again, this time to $40,000 and then to $60,000 per unit in Spring 2021.
I am not making any claim or argument that Bitcoin, or any other digital asset, is in a bubble. I have no idea what Bitcoin is truly worth. It might be something phenomenal or it might be the early winner that fails to exist in the future (think MySpace). I recently wrote about that here. This post is different. This is about the bubble forming in cryptocurrency offerings.
Beginning Concerns
This all started a little over a year ago when the guy I use for my website (and refer others to), would ask me about Bitcoin when we spoke. He said he started mining it and was going to ramp up on it. When we spoke a few months later, he was talking about how much more money there is in mining Bitcoin than in developing and coding websites. He was talking about giving up his profession completely to just mine Bitcoin (and play VR games).
This didn’t surprise me too much since he is a technology guy and Bitcoin mining is a technology thing. Mining bitcoin isn’t too far from his technological expertise. And everyone likes the idea of making some extra money – especially if it is easy. So while I found this interesting, it didn’t signal to me that there is a bubble.
Greater Signals of a Crypto Bubble
I am not on Facebook much, but I will peruse it from time to time. Some time ago I saw an old acquaintance “friend” post about cryptocurrency. He posted about a crypto app that can be downloaded and can start mining for you. Now mind you, this isn’t mining Bitcoin. It is mining another kind of digital currency. This individual has no experience with financial planning or investing.
Just the other day I got a text from someone I have mentored before. This person has decided against pursuing a stable job in the health care profession (which he has been pursing for years) and decided to become a financial advisor. He said he is really excited for cryptocurrencies and knows they will be big. He wants to be able to help people invest in cryptos.
I responded very kindly, but basically told him being a financial advisor has nothing to do with cryptocurrency. I sent him a link so he can learn about the CFP and everything that becoming an advisor entails. It appears the excitement of finding the next Doggy Coin (Dogecoin) is hitting just about everyone and speculating in crypto offerings is now “financial advice.” Oh Boy!
And Now the Proof
After the last event happened, I decided I would write about it. It’s kind of fun and eye opening. It reminds me of 1999 and early 2000 when many individuals quit their job and it was all about tech stocks. The question wasn’t whether they would go up, it was how quickly they would double. Dollar signs in our eyes and multiple hits of dopamine can cause most of us to act irresponsibly and irrationally.
According to CoinMarketCap, just in the last day, 30 new crypto offerings were listed. Check it out here. What the what???? How many have been listed in the past few months? Do you see the bubble in crypto offerings?
Crypto – An Unfortunate Truth
This is like watching a bad accident happening in slow motion and knowing you can’t do anything about it. People with no or very limited financial background are getting involved in something they have no clue about. I am sure some offerings will go parabolic and some will make money, before they lose it all. Companies are begging for employees. Originally, the thought was the free government Corona money kept people at home. Maybe now people are just deciding to strike it rich on mining crypto offerings that may not last longer than a few weeks.
It seems the most likely outcome is that crypto will be around forever in some form, just like technology. Yet some people, who don’t know what they are doing and are the very people who can’t risk money, may end up financially devastated, just like in the technology bubble. We have been here before. Indeed, the game is the same (easy money, exciting, new paradigm), the players are different (crypto).