Many people compare the hype of crypto currencies with the tulip mania of the 16th century. First of all: crypto currencies are not tulips or flowers.
Unlike the Dotcom bubble, crypto currency (we’ll call it “crypto”) is not a company. In the Dotcom bubble, people invested in companies with high profit expectations that could not be met by these companies.
If we can call something “bubble” nowadays, it is ICOmania. 80% of ICOs are SCAM. Period. There are many unscrupulous founders or even criminals who are so overwhelmed by the success of their ICO that they might still want to carry out the advertised project, but first take the money and say: “I’ll take care of it, but only in 20 years. Then the technology will have been sophisticated. And I still have a few things to do before.. on the beach…”. This ICOmania harms the industry, which confuses the fact that the transfer of any currency to criminals has nothing in common with a bubble over a technological invention.
Crypto is technology.
The price of a Bitcoin is irrelevant. Bitcoin is technology. The technology is not worth less just because tomorrow more people think the Bitcoin should be traded for 4560€ instead of 4890€. Bitcoin is not a company. Bitcoin does not have to pay salaries, buy food or go to the bank and say: “Oh please dear bank, I can’t pay my rent anymore, can you help me?”. The technology does not change. What has been traded is an idea of value without any basis – except, if we want to think that way, the amount of energy wasted to mine a Bitcoin.
An important factor that everyone who was dazzled by the massive price increase at the end of 2017 must understand: Every volatility (price fluctuation) is a result of manipulation. Without this manipulation, the price would only run sideways and without any fluctuations. The reason for fluctuations is the offering of crypto currency at a higher or lower price and the behaviour of the crowd as a result. It is well known that most of the Bitcoins are in the hands of a few. If these few people hold back the sale of Bitcoins or only sell at 10% above the price a day ago, this will result in a price increase of 10% – if there is sufficient demand – because most buyers will buy at the price that is called.
Thus, we also discussed the main reason for the price increase at the same time: increase in the volume of market participants. With a limited number of coins and a constant number of users there is price stagnation. On the other hand, new market participants are moving the issue: those who already have Bitcoins but are supposed to sell them – so that new market participants also can get Bitcoins – sell them at higher prices. This higher sales value increases the market volume of Bitcoin, as each coin is traded for more money with the same amount of coins. The mass of buyers controls the price level. The demand determines the supply. With Bitcoins market cap of 200 billion its easier to manipulate the market rather than with other FIAT currencies. In comparison: the world’s wealth amounts to approximately 200 trillion dollars.
If even your baker advised you to buy Bitcoins in December 2017, this was the indication of a hype and a good opportunity to get out.
So what does Crypto want?
The market for crypto currencies is so heterogeneous that there is still no common denominator for everybody. But one thing’s for sure: The next most important step in the crypto world is the tokenization of real values – so-called asset tokens or stable coins. The future for these tokens/coins is promising and the next huge step for trading real values on a crypto currency basis. The largest marketplace for crypto currencies ‘Coinbase’ received a licence to trade securities (i.e. asset tokens or stable coins) in July 2018. This is a foundation stone of future crypto currencies.
Many startups and crypto currencies already proved that Crypto is valuable for this world. So “stay hungry!”