Real Estate Investor Magazine South Africa Real Estate Investor Magazine - October 2017 | Page 54

Crypto-currency
Mania
JAMES PAYNTER
Director and Head Analyst at
Dynamic Outcomes Inc.
DotCom
bubble
reloaded
C
ryptocurrencies have burst onto the scene this year in
no unmistakeable way. Bitcoin (the forerunner of all
the crypto-currencies) has seen phenomenal gains the
past few months of 393% in 8 months (and over 2000% gain
in just 2 years).
The question arises:
Is this just all hype, or are they here to stay?
Bitcoin’s meteoric rise simply dwarfs previous financial
market manias, be it the Tulip Mania in the 1630s, the South
Sea Bubble of 1711, the Dotcom Bubble of 1999/2000, or the
US Housing Bubble of 2007/2009.
Wheras Tech Stocks (Nasdaq Index) took 8 years to gain
tenfold in price, Bitcoin has taken just a quarter of this time
for the same gains.
a market that was expected by all to grow at an exponential
rate indefinitely.
Widespread optimism
Hundreds of start-ups launched on the Nasdaq stock exchange
through IPOs (Initial Public Offerings), with many of these be-
ing based on no more than an idea (if that). What’s more, persons
invested in them simply because they believed they could not lose
in this sector of the market (all shares were rising), and every-
one was saying this market could only continue rising…until, of
course, it didn’t. And crashed spectacularly.
Over the next 12 months, the Nasdaq Index lost 72% of its
value – and tanked by 87% before it finally reached rock bottom
2½ years after its long-forgotten euphoria-driven peak…
Left behind was a market in tatters, looking much like a Ca-
ribbean island after it has been hit by Hurricane Irma, with dam-
ages and casualties aplenty, and a long road to recovery ahead.
But, the technology that was the engine of this bubble – the
internet – not only survived, but thrived.
And those companies that saw the opportunities to harness its
power to offer real value have not only survived to this day, but
have also thrived, with the likes of Apple, Amazon & eBay being
prime examples.
So, that leaves us with some questions as to where we find our-
selves today. First off, are we in DotCom Bubble #2?
Will the crypto-currency market bubble
burst?
Many will remember the hype of the Dotcom Bubble, as
internet technology took the world by storm – and every tech-
no-geek was climbing on the bandwagon to get their share of
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Inevitably, yes, as have all financial bubbles historically.
In fact, at the time of writing, this has likely already hap-
pened, with Bitcoin having tumbled since the beginning of
September. If so, expect further significant losses before we
see a bottom.
Will crypto-currencies survive?
Yes, and not only that, but the value-based ones will thrive.