Cryptocurrency rush like the .com bubble?

By January 23, 2014Bitcoin Business
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Cryptocurrency rush like the .com bubble?


Posted by on Jan 22, 2014 in News Bits | 0 comments

Recall that around the millennium many tech stocks were overbought, and the stock market subsequently crashed. The reason was simple: the internet was growing and everybody was convinced it was the future and that any company associated with it would surely make millions. They were right about the importance of the internet, but wrong about the economic value they were assigning to those companies, some trading at huge premiums. Think P/E in the 1000's. People associated just about any and every tech company involved with ecommerce, or having address xyz.com, as having the value of the internet.

Cryptocurrencies have the potential to be equally disruptive, and are also seen by many as “the future”. While this may be true, it seems that there may be a parallel risk here when it comes to valuation, especially with all of these xyzCoins, some trading in the millions of dollars in market cap despite being accepted nowhere. They are grouped and valued together like many of those ecommerce businesses were: simply by association.

While many people lost money in that crash those that got in early and sold on the way up made millions. Maybe this is what is going to happen in the coming years. Maybe there will be a cryptocurrency bubble with many alt coins being pumped on future expectations and possibilities, but then imploding simply because nobody accepts or uses them.

I think this analogy may apply here, and many would be wise to consider what happened. Many alt coins, while they may grow, will in all likelihood disappear much like many of these venture firms after being pumped in the .com bubble. We have many alt coins already that are accepted nowhere, and yet trade in the 10s of millions of dollars. To dot-come-era investors, that sounds all too familiar.

To be clear, I am “invested” in bitcoin, and I don't believe that we've reached anywhere near the critical mass that was experienced at the height of the .com bust yet. Also, I would caution anybody from concluding that “clearly we are in the pre-crypto bubble so I'd better buy up now because the dot-come-bubble made a lot of people rich.” I cannot predict the future. (but I like to on reddit)

View original post here: http://www.reddit.com/r/Bitcoin/comments/1vvel1/cryptocurrency_rush_like_the_com_bubble/


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