A new dotcom bubble in cryptocurrency?

Cryptocurrencies may be a novel concept, but the cautionary tales surrounding them have roots dating back to the Lydian electrum trite of 600BC, believed to be the world’s first minted coin. “Caveat emptor” (let the buyer beware), “The love of money is the root of all evil,” “All that glitters is not gold,” “A fool and his money are soon parted,” and “If it sounds too good to be true, then it is too good to be true” are just a few of the many proverbs, maxims, and sayings warning of the pitfalls of wealth accumulation. One might assume that people should be inherently skeptical of the latest financial trends, but history suggests otherwise. As the saying goes, the wheel of fortune continues to spin, attracting unsuspecting individuals at one turn and leaving them penniless at the next. South Sea Bubbles, tulip mania, railway mania, pyramid schemes, Ponzi schemes, snake oil sales, and the dotcom bubble were all part of this cycle. Now, it’s the era of cryptocurrencies, with Bitcoin, Ethereum, Ripple, and others taking center stage. The phrase “this time it’s different” is infamous in the world of international institutional finance because, as soon as someone claims it, alarm bells should ring. It’s a signal to prepare for potential disaster, stockpile necessities, and return to basics. So, can we equate cryptocurrencies with the next unfortunate financial event in a long line of historical swindles?

Considering the technology sector’s resurgence, surpassing the dotcom bubble’s peak in March 2000, it’s an opportune moment to ask this question. However, my inclination is to refrain from a definitive answer, primarily due to my personal background as a late baby boomer with a penchant for analog methods in a digital world. Nonetheless, the stage is set for a lighthearted exploration, gradually transitioning into a serious examination of the issue. To provide a balanced perspective, insights from market practitioners and observers who ardently believe in cryptocurrencies and their potential are sought. David Siegel, Jacob Eliosoff, and Rohit Talwar are among those who offer their perspectives. David Siegel, a blockchain, decentralization, and business agility expert based in Zurich, Switzerland, holds an optimistic view of Bitcoin, Ethereum, Ripple, and the multitude of cryptocurrencies. He relates these digital assets to the relentless advancement of technology, invoking Moore’s Law, which posits that computer power doubles every two years. In his vision, the world is entering an era of exponential growth, challenging established concepts of money, markets, and regulation. He emphasizes the need for diversification in the cryptocurrency space. Siegel contends that cryptocurrencies could make physical cash obsolete due to their efficiency and the global trend toward digital transactions. Blockchain technology, in particular, could facilitate a shift from a “push” model of business to a “pull” model, but such a transition requires a shift in mindset on a global scale. He also predicts that Ripple could replace SWIFT (the Society for Worldwide Interbank Financial Telecommunication), rendering the traditional system obsolete. Moreover, Siegel envisions the world’s top four currencies migrating to a shared ledger within the next two decades. Rohit Talwar, a global futurist and the founder of Fast Future Publishing, goes further, anticipating a transformation of every sector by 2020. He predicts that digital currencies will play a role in the future, alongside innovations like hyperloop transportation and 3D-printed cars. Talwar identifies ten key disruptions that are shaping the global business landscape, including the shift from physical to digital thinking, exponential technological advancements, and the migration from central control to decentralized systems like digital currencies and blockchain.

To offer practical advice to prospective cryptocurrency investors, David Siegel suggests several steps:

1. Start with a small amount of money, such as $100, on a reputable exchange like Lykke, Coinbase, or Kraken.
2. Buy some cryptocurrencies to familiarize yourself with the technology.
3. Watch educational videos on crypto-investing, security, and recent events on platforms like YouTube.
4. Stay informed about cryptocurrency developments through publications like Bitcoin Magazine, CoinDesk, and Brave New Coin.
5. Allocate no more than 10% of your overall investment portfolio to cryptocurrencies.
6. Diversify your cryptocurrency investments, aiming for at least ten different coins or tokens.
7. Divide your investments into Bitcoin, Ether, and a selection of other cryptocurrencies.
8. Be patient and monitor market volatility for potential buying opportunities.
9. Gradually build your cryptocurrency portfolio over time, taking advantage of price declines.
10. Once you acquire cryptocurrencies, store them securely in cold storage and adopt a long-term investment approach.

In conclusion, the debate over cryptocurrencies is ongoing, with passionate advocates and skeptics offering contrasting views. While some see cryptocurrencies as the future of finance, others remain cautious, highlighting the risks and uncertainties associated with these digital assets. As with any investment, it’s essential for individuals to conduct thorough research, assess their risk tolerance, and make informed decisions when considering cryptocurrency investments.

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