Mindset Comparison of The Bitcoin Bubble To The Technology Bubble in 2000
Today I had some time to do some research and I decided to dedicate my time towards bitcoin. However I found something in the internet that really scares me. On Google the search term "buy bitcoin with credit card money" is at historic peaks. There are all different kind of people who cannot even afford to speculate with bitcoin trying to benefit from the bitcoin speculation on credit money and loans. This is typically the last final stage of stupidity in a bubble. Now lets find out if we are in a bubble with bitcoin.
Bitcoin is a similar store of value like gold. All you will ever get back for your bitcoins is what another person is willing to give you for your bitcoins. You are not getting any dividends and Bitcoin is not creating value like a company does. As bitcoin is much too volatile for a currency and is used primarily for speculation I would call bitcoin a special commodity.
In 2000 I was too young to be invested in the stock markets and therefore did not participate in the technology bubble. However I thought today it might be interesting to analyse the mindset of the people in the technology bubble of the year 2000 and compare it to the current mindset with bitcoin. Similar to the technology bubble there are currently lots of young people on the side that bitcoin is life changing and similar to the technology bubble these young people and fund managers are funneling a lot of money into this new thing called bitcoin as the price climbes from one high to the next even higher price. In 2000 the inventions by the technology companies were life changing too and they are changing our lifes nowadays. However it took the nasdaq index over a decade to reach the old prices of the technology bubble. In 2000 there were older people like Warren Buffet who told you that it is a bubble and you are investing into multi billion dollar technology companies that haven't even sold anything. This is also true currently with bitcoin and they are warning the young generation of the bubble. However like in 2000 the young generation tends to not listen to these old business experienced and business oriented persons who already experienced their bubbles in their life times. They tell them that they simply do not understand this new thing. Similar in 2000 they told them that they understand nothing and that the nasdaq will reach 10000 next year. They were 100% wrong in the fact that they did not recognize the danger of the bubble but they were 100% right in the fact that the technology was life changing. This is all identically true for bitcoin currently. It took over a decade with the nasdaq to reach old highs of the year 2000 bubble. The thing with bitcoin is that you are investing into a single technology brand of the crypto currency market. If the final regulated crypto currency that will be adopted by the masses has a different brand name then bitcoin might stay worthless after the bubble pop and you will never ever see the old valuations of bitcoin again.
So what people do at the moment is they are getting into bitcoin on loans and credit card money. That is so scary. This is the final stage of a bubble when all the crazy people who cannot even afford some money in bitcoin want to get bitcoin. If this bubble pops, if all those fund managers have to sell of the crypto currencies (which is the first thing by the way that they will do before selling any stocks) this will really become a financial mess for a lot of young people.
I really hope I won't be right with my comparison to the technology bubble but when it comes to my personal portfolio management I continue to keep the capital invested into crypto currencies low for the reasons explained in this article.
I wish you all Merry Christmas and a Happy New Year! May your dreams become true in 2018.
Bitcoin is a similar store of value like gold. All you will ever get back for your bitcoins is what another person is willing to give you for your bitcoins. You are not getting any dividends and Bitcoin is not creating value like a company does. As bitcoin is much too volatile for a currency and is used primarily for speculation I would call bitcoin a special commodity.
In 2000 I was too young to be invested in the stock markets and therefore did not participate in the technology bubble. However I thought today it might be interesting to analyse the mindset of the people in the technology bubble of the year 2000 and compare it to the current mindset with bitcoin. Similar to the technology bubble there are currently lots of young people on the side that bitcoin is life changing and similar to the technology bubble these young people and fund managers are funneling a lot of money into this new thing called bitcoin as the price climbes from one high to the next even higher price. In 2000 the inventions by the technology companies were life changing too and they are changing our lifes nowadays. However it took the nasdaq index over a decade to reach the old prices of the technology bubble. In 2000 there were older people like Warren Buffet who told you that it is a bubble and you are investing into multi billion dollar technology companies that haven't even sold anything. This is also true currently with bitcoin and they are warning the young generation of the bubble. However like in 2000 the young generation tends to not listen to these old business experienced and business oriented persons who already experienced their bubbles in their life times. They tell them that they simply do not understand this new thing. Similar in 2000 they told them that they understand nothing and that the nasdaq will reach 10000 next year. They were 100% wrong in the fact that they did not recognize the danger of the bubble but they were 100% right in the fact that the technology was life changing. This is all identically true for bitcoin currently. It took over a decade with the nasdaq to reach old highs of the year 2000 bubble. The thing with bitcoin is that you are investing into a single technology brand of the crypto currency market. If the final regulated crypto currency that will be adopted by the masses has a different brand name then bitcoin might stay worthless after the bubble pop and you will never ever see the old valuations of bitcoin again.
So what people do at the moment is they are getting into bitcoin on loans and credit card money. That is so scary. This is the final stage of a bubble when all the crazy people who cannot even afford some money in bitcoin want to get bitcoin. If this bubble pops, if all those fund managers have to sell of the crypto currencies (which is the first thing by the way that they will do before selling any stocks) this will really become a financial mess for a lot of young people.
I really hope I won't be right with my comparison to the technology bubble but when it comes to my personal portfolio management I continue to keep the capital invested into crypto currencies low for the reasons explained in this article.
I wish you all Merry Christmas and a Happy New Year! May your dreams become true in 2018.
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