Disclaimer: The information in this blog represents the opinions of its author and is for educational purposes only. It is not intended as investment advice. Cryptocurrency markets are extremely risky so you should only invest money you are willing to lose.
Bubbles Are Scary
We totally get it. The word "bubble" terrifies you. But you know who's really scared? Banks, brokers, and governments.
They're trying to scare you with the word "bubble". in the past year more than 100 hedge funds have been created exclusively for the purpose of trading cryptocurrencies. By some estimates there are tens of billions of dollars worth of institutional money just waiting to dive in as soon as they get the green light from regulators.
Who Needs The Stock Market?
Where do you imagine all that money is coming from? The obvious answer is government currencies and traditional investments. According to Nuveen Asset Management's chief equity strategist Bob Doll, there's a saying of late: "...with bitcoin, who needs the stock market?".
Can The Dollar Compete With Bitcoin?
And some people are completely turning the tables, saying that pretty soon the dollar won't be able to compete with bitcoin.
That's exactly why banks, brokers, and governments can't shut up - "bla bla bla ... bubble .... bla bla bla .... bubble" - as they watch their money disappear.
By "Bubble", You Mean .....
But have you ever stopped to think about what they mean by "bubble"?
Clearly they're trying to evoke images of the Dutch tulip bulb mania of 1619-22 or the dot-com bubble of the late 1990s, both of which didn't end well. But these are spurious and misleading analogies.
The comparison falls flat because tulip bulbs aren't a disruptive technology, dot-com stocks aren't a revolutionary new asset class, and, most importantly, the rich people who paid for their mansions with the proceeds from those bubbles weren't bailed out with taxpayer money.
The real reason that the analogy doesn't withstand scrutiny is a mismatch in the underlying investor psychology driving the bubble.
Neuroscientific studies have shown that we humans delude ourselves into believing our actions are rational. The truth is that we act emotionally, and retrospectively justify our actions with reason.
Most bubbles are driven by the emotion of pure greed - people buy in the hope of selling to the next sucker at a higher price.
But this bubble is very different.
Optimism and Hope
Bitcoin has, almost overnight, emerged from the shadows of the dark web to become a beacon of optimism and hope that a revolutionary new math-based technology can replace an antiquated obsolete one in which a few corrupt individuals control the entire world economy.
Bubble From The Rubble
Bitcoin was born out of the rubble of the 2008 financial crisis. The people driving this bubble are the same average investors and homeowners who were decimated in that crisis and watched in horror as their tax dollars were used to bail out the same corrupt, greedy bankers who caused the crisis in the first place.
Not Scary At All
If what they mean by "bubble" is a market driven by investor sentiment rather than fundamentals; powerful upward momentum fueled by optimism, hope, and faith in a revolutionary new monetary system, then that's not scary at all. As a matter of fact, it's a very good thing.
Bitcoin hopes and dreams have finally emerged from the shadows of the dark web, and what an economic historian at The London School of Economics calls "...nothing short of an economic miracle" and The New York Times calls "an investment boom like no other" is now in full swing.
It's being fueled not by investment banks or institutions, not by governments or central banks, but by those same people who got screwed in 2008. This is evidenced by the fact that Coinbase, the most user-friendly on-ramp to cryptocurrencies, added 100,000 new wallets in a single day over the Thanksgiving weekend rally to $10,000.
Wallet By Wallet
Average investors aren't waiting for a green light from the corrupt bankers they bailed out 10 years ago. Instead, wallet by wallet, they are building the new global financial system themselves. Isn't it time for you to get over your bitcoin phobia and join the revolution?