The World is Going ‘Cryptocrazed’
And the ASX 200 went up…14 points yesterday. Big deal. Yawn.
If you want to know why punters, speculators and dreamers are pouring into the crypto market right now, just look at Litecoin and Ethereum.
These two have rocketed up 68% and 28% in the last 24 hours, as I write this morning.
These are two of the bigger coins on the market. So it didn’t even take much imagination or research to buy them.
We had Ethereum in our original Secret $20 Bitcoin Blueprint. It’s now doubled since October.
While the potential gains come this high and this fast, the number of accounts opening up all over the world is unlikely to slow down.
The Coinbase exchange is a proxy for industry user growth. Last year, it had under five million accounts. It now has over 13 million.
On 1 November, I jotted down in my notes that Reddit’s bitcoin forum had 380,000 readers.
It now has 530,000.
Why is this going to stop anytime soon?
The wisdom of the beauty contest
A knowledge of Asian culture and being under 35 is a huge help in this market.
That’s because most bitcoin trading is coming from Japan and South Korea right now.
Also consider something like this.
Tencent’s WeChat app dominates China’s online economy. There’s an entire generation accustomed to using mobile and online as a way of transacting.
Why would cryptos feel anything but normal in this environment?
One problem for us in Australia, as usual, is that we are basically irrelevant to the market.
It doesn’t mean we can’t participate, but the main trend drivers are elsewhere.
US analyst Tom Lee is a credible voice here. He’s certainly been correct on the recent bitcoin rally.
Recently, he made the point that the baby boomer generation drove US stocks from 1982 until 1999.
The millennial generation — across multiple countries — could do the same thing with the crypto market.
Cryptos are intuitive for this generation to understand.
They’re ‘digital natives’, as the lingo goes.
Companies will appeal to them in this way by issuing their own digital coins, rewarding users with loyalty tokens, and designing whole products around this ecosystem.
The ‘flywheel’ is in motion here, and nothing’s going to stop it.
It reminds me of what John Maynard Keynes used to say about making money in stocks using the analogy of the beauty contest.
He said it didn’t matter whom you thought was the most beautiful. It mattered who the judges thought was the best looking.
And right now, the judges like the look of crypto.
You can, by all means, stay out of it all.
But the chance to make a fast and furious profit is passing by every single day.
Yes, it’s speculative, but that’s what most stock buying and selling is anyway.
Of course, there’s always risk. That’s true of any market. But risks can be managed, as long as you design your system to suit your temperament.
There seems to be a common lifecycle that happens in crypto.
First you have to get set up. That takes a while. You have to find various service providers to buy and sell.
Then you have to work out how to store what you’re holding.
Generally, the first few buy orders are small amounts, as people test the waters.
Then they go a bit bigger as they get more comfortable.
How long before people start to go REALLY big?
World to stay cryptocrazed in 2018
I’m not saying we’re at that stage yet, speaking broadly, except for bitcoin.
I think 2018 is going to be even hotter in the crypto market than this year.
That’s not to say that next year’s winners will be the same ones as this year.
We’ll have to wait and see on that.
The lure of ‘easy’ money is going to be too strong for people to resist…and the demand is worldwide.
Apart from some wildcard event like war, speculation should continue to suck in buyers into both crypto and stocks.
This could make next year a whole lot of fun.
A lot of commentators — many of whom I doubt even have a crypto account — like to call the crypto market a ‘bubble’.
I don’t think so. It’s simply not big enough yet overall, and still too obscure for most people anyway.
And because institutional and professional money is still not heavily invested here, the crypto market is kind of immune to the ‘normal’ worries we generally hear around finance.
Don’t get me wrong. The crypto market has its own pressures and weak points. They’re just not the same ones as the stock and bond markets.
Put it like this: If the Fed hikes rates faster than expected, does someone holding, say, Monero give a damn?
I can tell you something else. Most of the feedback and questions I get is about the crypto market.
The world’s gone ‘cryptocrazed’, and that’s not changing for a long time to come.
Editor, The Daily Reckoning Australia