Study Bitcoin All Time Highs:
What’s driving it?
Study Bitcoin and other crypto-currencies and you’ll quickly see they are hitting all-time highs on a pretty regular basis. A fact forcing many in the financial industry to take another look at what was so recently written off as a “scam” or “bubble” or whatever. The market capitalization (a fancy name for the market value) of crypto has exceeded $150B very quickly. Bitcoin and Ethereum have blown traditional investments out of the water this year. Bitcoin, the largest by market cap, is up 727% over the past 12 months. Ethereum, the second largest by market cap, surged an almost unimaginable 4,737% from Jan thru Aug.
For comparison, it’s taken the S&P 500 more than four decades to return what Ethereum has in a matter of eight months.
What has happened to spur such exponential growth? Is crypto in a “bubble”?
These are questions being asked a lot. As for the bubble – if you consider crypto-currencies are less than Yahoo alone, one would have to say “no” to the bubble claims. Bespoke Investment Group contrasted the rise in bitcoin with infamous bubbles, such as the late nineties dot.com, and there’s almost no comparison. Tech stocks rose just over 1,000% over the entire course of that bubble, and bitcoin is already up more than twice that.
In any case – aren’t bubbles just phases? not the whole lifecycle? Aren’t bubbles just the beginning of something big? Yes, there will be crashes and dips, scandals and triumphs – and those left whining that it isn’t fair as well as those who become million or billionaires. In other words, what makes a bubble, does not disappear with it. Not even the tulips everyone keeps dragging out in comparison.
So, as an investor – you have to jump in, learn the game, and try to profit. Are cryptocurrencies going to go up or down in the medium to long term? If you think “up” – then holding a number of different crypto-coins over time will see some go sky-high, and others bomb. You can trade with so little money that you don’t care if you lose, because crypto has so many decimal points. The point is, everyone can get their feet wet and learn while some crypto is little more than “toy tokens” – like game app money. Because it could very well be a tide that sweeps all markets in the future.
Blockchain technology is emerging, disruptive, and new. The investor that understands cryptocurrencies will unlock the coming blockchain-boom to benefit handsomely.
Let’s look at a few reasons why cryptocurrencies are starting to take off.
- New business models in which incentives are offered users to share the value a business generates are making crypto-tokens boom. Early token holders will be rewarded for early adoption, helping spread the word, and using the coins. This will change consumer behavior, and open business to previously excluded customers.
- Governments have been printing money, effectively inflating assets and driving yields down. It is difficult to find hard assets that aren’t overvalued, and that will deliver a worthwhile yield.
- Blockchain technology is starting to be used to build public utilities. As this matures, networks of utilities can function with their own currency, without inflation, and with guaranteed caps on currency issuance to preserve value over time.
- Venture capital and private equity funds usually load companies pre-IPO to the point that the general public doesn’t get to participate in the growth of a company once it’s public. So, by the time ordinary people get to invest, the returns are mediocre.
- Millennials have watched the savings and wealth earned by their parents destroyed or eroded by the financial system. As a result, they are avoiding the status quo and going for cryptocurrency. With relatively high disposable incomes, and tech-savvy – millennials have no hesitation to back projects on the slim chance it will make them money. No kids, mortgage, or other obligations are holding them back from trying to generate wealth for themselves, and crypto is filling the void with exciting gains on an almost daily basis. So it’s hard for them to take anyone advising traditional financial routes seriously, and they don’t care if they lose because they’re young.
- Companies can do an ICO and raise tens or hundreds of millions of dollars within hours or days, without needing to be backed by a VC fund or a bank. The money comes from millions of tech savvy millennials worldwide who previously could not even participate in the high risk, high reward technology opportunities. Their investments in little-known crypto-coins could turn out to be like Ethereum or Bitcoin – life changing.
- Anyone in the world with an internet connection can buy a few hundred dollars worth of coins, turn a profit one day, take rewards to buy some more, and keep building a portfolio that will give them a chance to make hundreds of thousands or even millions of dollars. Millennials aren’t interested in a 5% a year return, especially if they only have a small amount to start with – because that kind of low return isn’t going to help. And, again – they don’t care if they lose it because they are young and willing to take the risk.
So, the crypto-warriors buy several different altcoins and day trade. They monitor their phones to try and buy low, sell high – take profits and spread it to acquire different crypto assets to leverage the risk. Some may not even realize their kids, nieces, nephew or grandkids are even into crytpo-currency, let alone believe they are putting so much effort into it…but a ton of them are.
Crypto assets have a global audience vs. regional, and anyone can participate – unlike the traditional stock exchanges. Yes, one must be diligent to avoid scans and ponzi schemes – but tech-savvy kids have learned to put in only a small amount, then get-in-and-get-out before the scam folds, and make a bit of a return in the process so they can move on to the next one. And – they have the time to do this! They don’t have careers, kids, responsibilities, etc. and they’re not afraid of disruptive tech, having grown up with it. They quickly study bitcoin and altcoins, educate themselves on crypto, open accounts, join chatrooms, scour the forums, monitor trade exchanges, become part of the crypto-ecosystem to keep their finger-on-the-pulse of what’s happening the world that might impact their decisions.
This is what is causing Bitcoin and other crypto-currencies to grow exponentially – those looking for “the next big thing” are diligently searching, whereas those less tech-savvy or more financially secure… aren’t even looking. By absorbing this space, they immediately gain the edge and will trade these crypto markets in a far more agile and profitable way now and in the future.
This is one thing I definitely think we can learn from millennials – but it goes against the grain for many 40+ adults that have worked hard to gain traction in this world. I get that it is hard to switch gears, risk what has been gained, and do so on something you know little to nothing about. But it may be time to gear up, educate yourself, learn this space, and get in the game.
Study Bitcoin and Get Ready
How does one study bitcoin? The first thing to do is open a free account on an exchange. Coinbase is the easiest place to start because it mimics what everyone’s used to, like PayPal or your online banking interface. It costs nothing and the risk is low because you use the exchange for nothing more than buying and selling the three big coins: Bitcoin, LiteCoin and Ethereum. You can buy as little as $1.99 worth – which is 0.00017518 bitcoin right this second. It will most likely be a different amount when you buy, but get yourself a little bitcoin so you can start learning that it works much like any other money – except that the value of it changes often.
Once you have a crypto wallet on Coinbase, then consider opening a free account on Bittrex.com. Bittrex supports a plethora of coins, so one can get a good feel for the market and watch the action daily with charts and tickers. CoinExchange.io supports some really small coins and is a good place to practice buying and selling coins that have almost zero value and negligible risk.
The point is, one can start experimenting now for “penny ante” stakes, and skill-up for the time when this market breaks into the mainstream. Whether or not you believe in crypto-currencies is irrelevant – understanding crypto and the blockchain may soon be very valuable knowledge indeed.