According to many experts that are skeptical of crypto currencies, the market may crash hard just like the dot-com bubble. There is certainly a boom of crypto currencies emerging into the market, but everything seems artificially high. There are some legitimate contenders on the market, like Bitcoin or Ethereum, but many of the new launches are doomed to fail eventually.
It really is a tell-tale sign that once a currency is launched, the development team dump their coins as soon as it hits the exchanges. For some of the mid-sized to larger products, the currencies are simply being over-valued.
Oaktree’s Howard Marks simply says that these currencies are “not real” and that they are being overvalued. In fact, many of these crypto-currencies appear to be the blatant pyramid or Ponzi schemes.
There is still potential for a handful of the coins and many speculative investors are clamping down on them. David Sacks, who was involved with Paypal and other large internet businesses, believes that crypto-currencies are the next big thing to hit Silicon Valley.
What Defines Money?
Taking a look at a big Bitcoin investor, the CEO of McEwen Mining, is that currency is all about a trade medium. If you observe prisons, they will use items like cigarettes or canned fish as forms of currency since buyers and sellers agree that it has a certain value. The same principle applies to government-issued money or Bitcoin. As long as there are buyers and sellers trading at certain agreed amounts, crypto-currencies will have value.
The Dot-Col Bubble
It was evident for some economists that the boom in Internet businesses during the late 90s was doomed for failure. Some of the signs that made the bubble burst included: most of the new startups did not have viable profit strategies, business universities were gearing towards internet startups and low-level employees were interested in tech-based stocks.
Luckily, Bitcoin is still not at the point in which the most obvious signs of a bubble bursting is quite obvious. There have been booms and busts during the short lifespan of Bitcoin but it has been relatively minor and with quick recoveries.
Some of the worries have mainly been in the “altcoin” markets. ICO announcements have been very abundant and most of their models have been exceedingly frivolous. Bitcoin, in comparison, may be like the tech giants that have survived the dot-com bubble like Amazon or Priceline. It has the most amount of trust in the market, it serves a purpose and there is a lack of central control that some of the new currencies have.