This time it’s different…

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I have been investing, trading, and following cryptocurrencies since 2011.  Back then people would speak negatively about my choice to put wealth into it and I disregarded their advice because they simply did not understand the technology.  Fast forward to today where I now have a great deal of wisdom in both cryptocurrency markets as well as the cycles of human fear and greed.  When I urge people I am disregarded in my advice by the newbies of the market.  Where it stands now is firmly in bubble territory and I will delve into why this is absolutely the case.

Not only Bitcoin but virtually all “altcoins” have gone on a meteoric rise this year.  Hundreds of millions of dollars in venture capital and ICO (Initial Coin Offerings) funding has been dumped into this emerging market.  The hype has gotten so intense that in the last week a coin by the name of “Fuckcoin” rose 370% in a single day.  Investors and traders care little for any real substantive value in the underlying cryptocurrency technology so long as it has a convincing whitepaper.  Ostensibly these early investments are used for software development surrounding the cryptocurrency.  The vast majority of the capital pouring in is purely speculative on repeating the 2x, 10x, and beyond returns that have so far rarely failed to materialize during 2017.

I have urged caution to many of my friends that have gone from struggling Libertarian technophiles to (on paper) quarter, full, or multi millionaires on paper.  They all have such similar arcs and lamentations.  “If I had only done X I’d have even more.”  “I plan to do X with my winnings.”  The identical stories and plans are uncanny.

One acquaintance is just quit his part time tech job.  May of next year he will be cashing out and retiring fully.  He has a vacation planned for next month.  When I try to urge caution I get the same words I would have said in 2011 about this being the “new money” and I lack proper understanding to render advice.  His money is safe, you see, because it is just sitting in one of these unregulated exchanges generating interest by loaning it out to margin traders.  I asked him if he was aware of the Bitfinex hack in 2016 that saw people doing just that take a 35% haircut on their funds and be locked out of trading them while Bitcoin itself saw a 20% decline.  He is not aware of this.  He is assured by experts at MIT and JP Goldman Lynch with PhD’s that their models predict one Bitcoin to be worth $500,000.  I ask if he has ever heard of Long Term Capital Management or the book on the subject aptly titled When Genius Failed.  He has not.

Another acquaintance has been big into the ICOs.  He has had remarkably prescient judgement in selecting ICOs that multiply his initial investments fourfold or twentyfold.  He has not yet selected a bad investment this year. His acumen is surely the sharpest in the world at this new venture capital realm.  He just left on a monthlong vacation with his wife after quitting his job as a server.  When I first asked how much he has converted into cash so far I am told about his plans.  “When he gets back” he will be hiring a CPA and purchasing a $500,000 home.  He needs to diversify, he thinks, because all of his gains are put back into new ICOs.  I press the question once more.  “How much, today, this very moment, have you cashed out?”  With this direct question I get the answer, “0%”.

I received a random message from a longtime friend last week.  This same friend came to me two years ago trying to get into the market at the very wrong time.  I tried to tell him then but I was met with the same “I don’t understand, this is new money, it’s different this time” routine.  Well now he is back and as a coder wants to work on his own ICO.  I tell him to hurry.  Get in while the gettin is good and people are throwing money your way.  He is also heavily invested into several ICO’s already.  With each he can talk at length about why they are great investments.  Each have also made him a lot of money already so he has picked them very well.  As it is becoming a routine for me this week I press hard the absolute very moment amount of cashing out.  Again, it is 0%.  You see, he lost a lot of money two years ago on this.  He made mistakes and only needed to do a few things differently.  Because this time, after all, it’s different.

I decided to write on this topic earlier in the week but as of writing in the past 24 hours many cryptocurrencies suffered a precipitous decline.  I received a few messages of anguish after they tried, painfully, to buy the dip on the way down with far too much leverage.  Still they remain a very high prices relative to where these incredibly smart people first entered.  They are still the smartest guys in the world in their minds.  I do not know where or when the top will be.  The only thing I do know, with absolute certainty, is that these things only end one way.

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