The cryptobubble seems to be the topic on everyone’s mind, and due to the speculative nature of financial bubbles we may potentially never find out until it bursts. Regardless of your personal opinion and ignoring whether there is really a bubble or not, there is certainly a lot to look forward to in the near future for those technologically and financially in blockchain technology.
There seems to be no end of commentaries comparing the money we are seeing flow into cryptocurrency today and the dot com bubble of the late 1990’s, and it certainly is possible to draw some parallels between them.
The dotcom era was a speculative bubble formed by the rapid rise and interest in internet companies. As with many cryptocurrencies prevalent today, many startups were more fixated upon venture capital and Initial Public Offering, rather then developing a product or service with real-world value.
With today’s hindsight, we can tell that the dotcom bubble burst was absolutely necessary. It was completely unsustainable for investors to keep dumping dumb money into projects which would realistically never turn a profit, however it did provide a foundation for projects with real-world applications, such as Google Amazon & eBay, and gave them opportunity to thrive.
Over the past six months, crypto has undergone and enormous explosion, both in terms financial investment and real world applications. A notable example from March 2017 when the Enterprise Ethereum Alliance was announced, investors flooded into the cryptospace because of the exciting and new possibilities with blockchain technology, much the same as in the dotcom era. Most unfortunately the hype associated with real-world adoption has been accompanied by the hysteria of rapid financial gain.
Ethereum Prices centered on EEA annoucement March 2017
At the time of writing this article, coinmarketcap has nearly 900 different cryptocurrencies, over 250 crypto-assets listed and presently 372 of them have more then a million dollar market cap. While there are certainly altcoins which fundamentally benefit from their own token in the crypto-ecosystem, the vast majority of altcoins (or shitcoins) bear very little difference to Bitcoin or Ethereum barr their name and token identifier. It is abundantly clear these tokens only exist for the venture capital vehicle of parent corporation as their token asset serves no fundamental purpose that could not be accomplished by Bitcoin or Ethereum by themselves.
Take for example meme currencies like CannabisCoin or FuckToken. With a combined marketcap of nearly $5 million, it is almost unbelievable that people continue to see these assets as a store of intrinsic value. Unlike Bitcoin with it’s first movers advantage and widespread adoption as cryptocurrency of choice, they hold no value apart from a cringeworthy joke factor, and there are hundreds more like this.
This being said, the amount of money invested crypto currently is a drop in the ocean compared to the mainstream financial world, and we have really only seen the beginning of real-world adoption of crypto technology. The best thing investors can do to guarantee we never see a dotcom style crash is personally facilitate the flow of cash from poor investments into assets with potential. Researching before investing and ensuring they have a solid understanding of the product, it’s token’s use-cases and the product ecosystem ensure that even if a crash of some description occur, they will be somewhat insulated having invested in a quality product.
A Bright Future
In contrast to the hyped altcoin disaster, crypto-technology has an incredibly bright future after it sorts out it’s growing pains. We’ve discussed before the future role the blockchain will have on the banking and financial industries, to just name one of the possible use cases in the near future. There is little doubt that while we are still in early days of the crypto revolution, but it is more important now then ever that investors back solid reputable products and return an air of normalcy to the crypto world. It is almost certain we will continue to see large gains in the future however the onus is on the speculator to ensure they are backing a solid and trustworthy asset.