Crypto-currencies, tulips, market bubbles
Frances Coppola writes about financial bubbles. She says the market for crypto-currencies shares characteristics with earlier bubbles like Dutch tulips and dotcom stocks. Which means a crash is underway. That’s not just Bitcoin, but all of the crypto-currencies.
The remarkable aspect of this is that everyone couldn’t see it coming. As Coppola points out some investors still don’t accept the likelihood of a crash.
It will be interesting to see what remains after things settle down. The idea of a blockchain isn’t going away. Yet the, at times irrational, enthusiasm for crypto-currency could be coming to an end.
As a blockchain architect myself, I am well aware that rival blockchains are subject to market corrections due to the increasing number of Initial Coin Offerings that offer pre-mined tokens in exchange for established Cryptocurrencies.
As people are realising that most of these are at best fad projects like Dentacoin for example, the coin for Dentists, it is rather hard to see the genuine value in these projects.
Furthermore, the main point is what do these tokens offer in terms of real value ?
Is it inherently pointless, is it no better than fiat financial instruments ?
In that case, why bother buying an ICO token if there is no gain ?
Are the investors taking for granted that there is no inherent advantage to a novelty token just because it is in an ICO ?
Isn’t this the reason why conventional financial tokens such as shares and forex are regulated ?
This is why my Cryptocurrency project is based on inherent value, rather than merely acquisition of hashes.
It is arguably better to have a basis in reality for value rather than an artificial value.
And that is why the major Cryptocurrencies are all going through their market corrections.
Investors are realising that the fundamentals are all out of proportion to the fiat exchange rates for the Cryptocurrencies.
In conclusion, of course the market will correct the price on the Cryptocurrencies, the bubble has been caused by too many pre-mined tokens that are bought with major Cryptocurrencies.
As the ICOs are not worth the over investment for little more than a whitepaper and a cloned blockchain project, it is not difficult for investors to wake up and smell the tulips really aren’t that fresh.