There are two competing theories of investment/speculation: "fundamental value theory" and "greater fool theory."
I can't remember which scion of finance it was, but one of 'em said "know what kind of investor you are." I am a fundamentalist through and through. This is why I spend a lot of time trying to figure out the "fundamental value" of cryptocurrency:
However: fundamentals investors represent a vanishingly small proportion of the market. It's pretty much those of us who bought in the beginning and saw no reason to sell. Everyone else is trying to figure out how much they can sell their holdings to other people for, or figuring out just how cheap it'll go so they don't pay too much. Flocking is something you can study algorithmically; the entirety of BEAM robotics replaces complex programming and algorithmic difficulty with the maxim that many individual points following simple behavior lead to a cloud of complexity. Really, this is also where laminar flow becomes turbulence in fluid mechanics.
So right now you could point to:
- News that China is attempting to produce an orderly shutdown of crypto mining because it burns coal
- A former Wells Fargo exec calling crypto a "pyramid scheme
But really? Sometimes a bird lands on a wire and the other birds move over. Sometimes a bird lands on a wire and the flock takes to the skies. These are deeply, heartbreakingly unsophisticated investors we're talking about, and they're operating in a market that is opaque, rudimentary, shallow and rife with manipulation and exploitation.
Pigeons gotta pigeon, man.
As has been pointed out, it's a turbulent market. "Crashes" like this have happened several times, and will likely keep happening again until the bubble really does burst.
Blockchains / DLTs (distributed ledger technologies) are an interesting technology, but this current wave of enthusiasm for them is pretty much completely divorced from reality; there are very few actual applications out in the real world that use a DLT, so most of this meteoric rise has been backed by speculation.
My guess is that DLTs will end up like Linux: they'll be present in the background of a lot of things we do in day-to-day life, but most people will never actually come face-to-face with cryptocurrencies or the tech itelf.
I think your last paragraph is spot on, but it completely contradicts the "few applications out in the real world" part.
People are legit working on this stuff, and I expect to see blockchain-like tech increasingly infiltrate academia. And I doubt that Average Joe will ever grasp the mechanics, but they will eventually trust the systems that result.
- I think your last paragraph is spot on, but it completely contradicts the "few applications out in the real world" part.
My point was more that there are no current, widespread applications out there; I think that there will likely be widespread applications in the future, but they'll be Linux-like in that most of us aren't even going to be aware of them.
I don't deny that people are working on DLT-based solutions. Whether 99.9% of the ideas are even viable (if you can replace the word "blockchain" with the word "database", you likely don't need a blockchain) is another question. We're still in the extremely early stages of figuring out what we can and should do with DLTs, so we're going to see a lot of "put a blockchain on it!"-type solutions among the actually useful ones
You know what's interesting to me? I've probably had a dozen discussions with different people all asking me about cryptocurrency and not a one of them gives the first fuck about utility. They don't care at all what Ripple is good for. What they know is that if they bought some last year they'd be fuckin' rich this year.
These are people who have never shown the slightest interest in equities. They don't even know what a dividend is. They don't have 401(k)s. What they know is that they can play the ponies on GDAX or whatever with whatever money they have and they can see real, actual appreciation.
The real market is on a tear right now. That halcyon realm where Goldman Sachs used to get fuckin' rich. It's up 30% YoY because the markets figured out that the Trump administration wasn't going to regulate shit and there was sun shining to make hay. But if it legit costs you money to hold Tesla, and you can only buy it in increments of $350, what the fuck is the point?
I think we've all neglected the huge X-factor the average no-pension no-IRA no-401(k) Uber-driving Millennial plays in all this - crypto is like playing in Forex without having to stake a $100k bond, with the potential gains that dwarf the dotcom bubble. And I think there's this assumption that everyone is going to shuck out of crypto just as fast as they shucked into it without recognizing that people don't do that with goddamn stocks.
Cryptocurrency is a movement to many of the participants. There's a zeal there that you don't see in equities or beanie babies or anything. And I think it's going to warp the ever-living fuck out of expectations.
- You know what's interesting to me? I've probably had a dozen discussions with different people all asking me about cryptocurrency and not a one of them gives the first fuck about utility. They don't care at all what Ripple is good for. What they know is that if they bought some last year they'd be fuckin' rich this year.
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- Cryptocurrency is a movement to many of the participants. There's a zeal there that you don't see in equities or beanie babies or anything. And I think it's going to warp the ever-living fuck out of expectations.
This is a good point, although I don't necessarily completely agree. I'd argue that the, uh, less informed zealots (because there are well-informed zealots as well) likely won't have as much of an impact on how things will shape out to be. Less-informed zealots are, for example, immutability maximalists, or the ones falling for the scammy ICO pitches. Well-informed zealots build Hyperledger; they're more likely to produce something actually transformative.
Of course quality and utility doesn't necessarily mean anything, and technologically inferior solutions have won out more than once due to accidents of economy, politics, sociology, psychology, history and so on.
- I think there's this assumption that everyone is going to shuck out of crypto just as fast as they shucked into it without recognizing that people don't do that with goddamn stocks.
I don't know. The situation resembles the old penny stock crazes way back when (just that its effects have been amplified by the availability of instant global communication), and cryptocurrencies are much easier to transact with compared to securities. As you've pointed out, the current prices are mostly driven by people with very little idea of what's actually going on: assuming they'd act analogously to people who've invested in traditional securities seems a bit iffy. The whole market's still in its infancy, and the market forces at play aren't quite where they will be when the actual big players get in the game: a few million uninformed crypto enthusiasts probably won't have voice in what happens then.
Still, it's impossible to say what will happen, and what we're seeing is unprecedented. It'd be stupid to completely discount the "masses"
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I heard that’s it the lunar new year in China and that people pull out their crypto money for gifts. It has happened before and now the crypto market is recovering. It looks like it was just a dip.
That is wishful thinking at best. Even /r/bitcoin dragged the guy who proposed it.