As many of you are already aware, since January, cryptocurrencies, bitcoin included, have entered a deep bear market. Many have dropped to one-fifth of their market highs just a few months ago. Bitcoin, Ethereum, Ripple, Bitcoin Cash, all of these cryptos and many more have been absolutely slaughtered over the last few months.

Bitcoin was as high as $17K a few months ago, now its down around $6K. Ouch. Ethereum was over $1000 in January, now it’s stumbling around $375. And so on.

As I said a while ago, I already took my profits from both bitcoin and Ethereum, meaning that I still have money in those two, but 100% of that is free money that I made on the rise last year. This is in addition to the profit I already took out. So even if bitcoin and Ethereum went to zero tomorrow, on paper I wouldn’t be very happy, but I haven’t lost any money that I’ve invested (and made a profit on it). Since, as always, my primary investing goal is to not lose money.

So while this doesn’t really affect me, a hell of a lot of people who were very excited six months ago have lost a lot of money. It’s pretty ugly.

I actually think this is a good thing for cryptos.

First, it will help wipe out the stupid cryptocurrencies, keeping in the good ones. That’s always a plus.

Second, and more importantly, this recent crash will (hopefully!) clean out most of the exuberant, irrational, ignorant investors who never knew what the hell they were doing. Once most of these people are out of the crypto markets, any growth from that point on will be A) more steady and stable, and B) real growth from real people using these things instead of false growth from irrational people trying to get in and make a bazillion dollars.

Of course this is just a guess on my part. I could be wrong.

I still think bitcoin, and/or Ethereum, and/or some future fork in either one of these will grow in value over the next few years. So despite this dip, I’m not selling (though I’m not buying either, since I don’t want to screw up my asset allocations by owning too much crypto). My best guess is that some or all primary cryptos will be higher 2-3 years from now before they are replaced by something else. Hopefully I’ll be smart enough to cash out before then.

We’ll see!

15 thoughts on “Cryptocurrencies Latest Crash

  1. It is funny to see how the sentiment towards cryptos has begun to change in just these few short months.

    Back in November, there was an enormous amount of content touting how high the price of the cryptos could rise and “you’d better get on board before the rocket blasts off”.  Now, most people wouldn’t touch the cryptos because of how badly they’ve been burned by this selloff and all the scams that seeped into the space.  It’s truly remarkable.

    This was my first time investing in a much more speculative asset.  Luckily, I got in around the time you posted your original Bitcoin article back in February of last year (thank you for those articles), so I’m still holding a good profit.

    It’s just nice to have been in the market during this whole move, purely from an educational standpoint.  Now, if/when a move of this nature comes around again, it’ll be much easier to see the signs of exhuberance and act accordingly.

  2. Back in November, there was an enormous amount of content touting how high the price of the cryptos could rise and “you’d better get on board before the rocket blasts off”.

    Yep. Irrationality rules the day, as usual.

    There was a “rocket,” but it was early last year or late 2016, not November.

  3. Do you still think investing in cryptocurrency right now is a good long-term investment?

    Speaking very generally, yes, as a speculative investment.

  4. The investing part of BTC was a real pain in the ass really. Of course if you made big bucks good for you (I made some too.) The point about BTC that is important is that it is a currency independent of government control. However, the crazy investing thing made it so volatile that nobody could seriously treat it as a currency.

    I hope all the craziness dies down and it becomes more stable and viable as a means of payment.

     

  5. I recommend reading and following some “Bitcoin maximalists” on Twitter. They make a very strong argument as to why Bitcoin will be the one cryptocurrency to rule them all, based on it being the most decentralized and battle-tested (it survived a controversial hard fork called Segwith2X), having a strong network effect, orders of magnitude more harsh power, the best/largest team of developers ideologically dedicated to its success, and the “perfect” monetary policy (only 21 million bitcoin ever).

    An economist of the Austrian school, Saifedean Ammous, makes the case in his new book, “The Bitcoin Standard”. I highly recommend reading it and checking out his twitter feed. His re-tweets should point you to others like him.

    https://twitter.com/saifedean

    Maybe now is a good time to buy a whole bitcoin. It might very well be worth a fortune some day.

  6. ” when the man on the street is buying, that’s the time to get out…”

    I knew that cryptocurrencies were fucked when a girl I work with who didn’t know anything about anything when it came to investing or speculating told me that she was looking into buying Bitcoin.

    When those people are looking to get in, those are the last buyers. Look Out Below. That being said, I’ll probably buy some once I see stability and Sanity retake the market

  7. I recommend reading and following some “Bitcoin maximalists” on Twitter. They make a very strong argument as to why Bitcoin will be the one cryptocurrency to rule them all

    I generally agree that bitcoin will rise in price down the road, a lot, but as I’ve mentioned before, a lot of my fellow libertarians are getting a little too excited about it, and are letting their political views, their emotions and their hopes cloud the analysis.

    I think bitcoin will do well, but there are many, many reasons why it possibly won’t.

  8. I think Mark Stephens (a.k.a. Robert X. Cringely) rather nicely describes what Bitcoin is and isn’t in this article:

    https://www.cringely.com/2018/01/24/prediction-4-bitcoin-crashes-booms-crashes-booms-2018-traders-figure-not-currency/

    He say it’s basically a tool for the rich oligarchs and tycoons to get money out of their countries. When they dump some hundreds of Millions of dollars ( or rubles or yuan or whatever) in Bitcoin the value goes up (and then all the fools jump in). When they convert back to “hard” currency in some other part of the world, the value goes down. In their case, they might even gain due to value fluctuation, but they don’t care even if they loose some millions, their prime objective being fulfilled.

    So, all we need to do is wait for the next tycoon to dump cash in Bitcoin and it’s value will go up again 🙂

  9. I think bitcoin will do well, but there are many, many reasons why it possibly won’t.

    Can you please share these reasons?

  10. Can you please share these reasons?

    I can’t list them all off the top of my head, but just from the top of my head, increasing usage fees encouraging users to go elsewhere, power requirements become too intense, the elites create and back (with billions of dollars) another crypto and get the market to use it, the market naturally moves to another superior version of bitcoin/crypto (one that’s perhaps not invented yet), and so on; many others.

  11. Some points based on what I’ve learned in my Twitter bitcoin maximalist education:

    increasing usage fees encouraging users to go elsewhere

    My understanding is that increasing usage (transaction) fees will just lead more people to use bitcoin in a different way — as a unique store of value for their savings in the long term. This podcast episode is all about it:

    https://noded.org/podcast/noded-030-with-saifedean-ammous/

    There are also second-layer solutions (i.e. The Lightning Network) being developed that allow for fast settlement for smaller transactions (even sub-satoshi-level). Think of these as your “checking account” for spending and receiving money, where BTC is your savings account that you leave alone until you need it (rarely paying those high transaction fees).

    power requirements become too intense

    Not sure if this is actually a concern, but OK.

    the elites create and back (with billions of dollars) another crypto and get the market to use it

    Does it have a fixed monetary policy or is it subject to arbitrary inflation? Will it be as decentralized and trustworthy as bitcoin or can the people who have a majority of the network fundamentally change the rules when they want to? And will people realize this?

    the market naturally moves to another superior version of bitcoin/crypto (one that’s perhaps not invented yet)

    A massive benefit of Bitcoin is its network effect (amount of mining power + decentralization because of the way it grew organically). My understanding is that this makes it unique among all other crypto currencies.

    Any good idea developed in a cryptocurrency other than Bitcoin can also be developed and included as a future addition to Bitcoin.

    and so on; many others.

    I always welcome both sides! One needs to be like Dostoyevsky and build the best case for both perspectives, and see which wins out in the end.

  12. Like I said, I’m pro-bitcoin, so if you’re looking to debate someone anti-bitcoin, I’m not your guy.

  13. Like I said, I’m pro-bitcoin, so if you’re looking to debate someone anti-bitcoin, I’m not your guy.

    Not looking to debate anyone. Just sharing information. Cheers.

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