Will Cryptocurrency Investing Become the Next Dotcom Bubble?
In fact, we’re already in the early stages of a crypto bubble.
Well take a look yourself.
A) Paris Hilton loves crypto
B) Lindsay Lohan NFT sells for $50k
C) CNBC hyping up dogecoin and talking about crypto with the same suspense as sports events
D) Everyone wants to day trade crypto.
E) NFTs sold for extreme prices.
Not to mention, my uncle, mum and aunt are all buying crypto. If that isn’t an early sign of a bubble, I don’t know what is.
How are these early signs of a bubble?
Well if you were around back in the dotcom days, you would find these signs all too similar.
Back in the 90s, the internet completely transformed communication forever and early investors saw this opportunity. They were salivating for profits.
This led to the dotcom bubble, which was a stock market bubble caused by massive speculation of internet stocks. The NASDAQ itself rose by 400% in 5 years, which is absolutely bonkers for a traditional stock market index.
The FOMO was very real back then. People were quitting their jobs and taking on loads of debt to day trade for a living.
And news media outlets were also hyping it up, similar to what we see today with crypto.
Much of what went on was speculative, pretty much every company was losing money and focused on marketing instead. (Everything in crypto is speculative)
But this did not stop people from investing in them. They ignored the weak cash flow and were mesmerised by the promise of this new technology. Who could blame them really. (Sounds familiar?)
This is the definition of a bubble by the way. When the price of something is waayyy higher than the actual real value of the thing itself.
Our view of the market is heavily warped
In crypto today, we can see many projects that seem to be great ideas on the surface. We look at their website, read all their fancy words and all their amazing benefits and we really do get a sense that there is great potential behind each one.
However, the prices of these projects are heavily warped.
Warped? By what?
Well, by us.
You see, when someone buys into a crypto, they become a mini-brand ambassador for the project. If you’ve been in crypto long enough, you will realise almost everyone is “shilling” their own bags in this way.
Everyone wears their cryptos like a badge and treat it like a religion. We already have different sub-communities such as BTC maxis, XRP army and LINK marines.
The crypto space is pretty tribal, but for marketing purposes, this is great for the cryptos. Each investor is providing free word-of-mouth, attracting developers and new investors to their project. (Similar to how marketing was such a big component of the dotcom bubble)
This creates an echo chamber and heavily influences new investors entering the market.
These new investors get distracted by prices and the very seductive chance of earning a huge amount of money, but do not base their investments on solid fundamentals. (Ignoring fundamentals, similar to the dotcom bubble)
Many just invest in whatever a You-Tuber or an Elon Musk tweet tells them to, thinking that they can get-rich-quick.
Many projects get pumped and hyped up because of this, becoming very popular, very quickly. And they use quality web hosts as well.
This then attracts more investors, and the cycle goes on.
Don’t take financial advice from a stranger on the internet. Investing is risky, period. Do your own research and invest only what you can afford to lose.
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