“Fuck” crypto surges 400%

Lol, cross-posted from Sovereign Man:

I vividly remember having a conversation several years ago with a woman about her real estate investments in the United States.

It must have been around 2005 or 2006… the peak of the property bubble.

She was a psychologist from somewhere in the midwest, telling me about how she was flipping off-plan condominiums in Florida.

Basically she would put money down to secure a condo unit in a building before it broke ground, then sell her contract to someone else at a higher price when the building was closer to completion.

I remember as she told me this story she was practically cackling at how quickly and easily she was doubling and tripling her money, and at one point said, “It is just soooo easy for me.”

Those words stuck.

I remember thinking, “Investing isn’t supposed to be easy. There’s supposed to be risk and hard work involved.”

But she wasn’t alone. Legions of amateur investors were piling into the market doing exactly the same thing.

Everyone seemed to be flipping condos. And everyone seemed to be making money.

It didn’t add up.

I remember one investor explaining to me how he would flip his condo contract to someone else when the building was 30% complete. Then that buyer would flip the contract to another investor when the building was 60% complete. Then another sale when the building was 80% complete, etc.

“But who is the person at the end of the line?” I asked. “Someone has to eventually live in all of these condos and be willing to pay the highest price.”

“Oh there will ALWAYS be plenty of people who will live here,” he told me.

To these investors it was a foregone conclusion that required zero analysis: there will always be buyers, no matter how high the price gets.

One of the marks of a good investor is learning from his/her mistakes; when an investment performs poorly, a good investor will try to figure out WHY, and incorporate those lessons into future decisions.

But a GREAT investor will learn from his/her successes.

This is rare. Perhaps it’s part of our human nature. When we succeed, we automatically conclude that we’re really smart.

We seldom examine what really happened. Did we get lucky? Were we riding the wave of a giant bubble? Or, perhaps our analysis was spot-on and we nailed it.

It’s hard to say for sure without some serious self-reflection.

But again, it’s in our nature to presume that we’re brilliant.

And that may be one of the most dangerous things of all… because our infatuation with our own brilliance causes us to do irrational things.

Instead of thinking, “Whew, I got really lucky, I’d better take some money off the table before this market crashes,” we think, “I’m so smart… now I’m going to double down and make even more money.”

It’s like gamblers at the craps table– people delude themselves into believing that they’re on a ‘hot streak’ and ‘can’t lose’, so they keep increasing their bets instead of cashing in their chips.

Eventually the luck runs out… and the money vanishes quickly.

I’m telling you all of this because I see the same thing right now in the “ICO” market.

If you haven’t heard of ICOs, it stands for Initial Coin Offering. It’s a combination of venture capital and cryptofinance.

Traditionally, startup companies have raised the money they’ve needed from angel investors and VC funds.

These days, companies are raising money by selling digital ‘tokens’ to investors, most of whom typically pay in Bitcoin, Ether, or some other cryptocurrency.

Tokens often represent shares in the startup company, just in the same way that Apple stock represents shares in Apple.

And, just like shares of Apple, investors can buy and sell their tokens in the market.

There are countless startup companies now issuing tokens. And, just like the price of the cryptocurrencies themselves, many ICOs have soared in price.

There’s a token issued by Stratis, for example, that is up 101,168% since its ICO last summer. The NXT token is up 672,989%.

Those are not type-o’s.

There’s another token that’s actually called “Fuck” which is up 370% in the last 24 hours.

The returns are absurd… especially considering the assets are priced in Ether or Bitcoin, which have also soared to all-time highs.

So on top of a 1,000% return in Bitcoin, ICO investors have also made a 100,000% return in the token.

But I’m hearing exactly the same cackling that I heard from the real estate bubble days more than a decade ago.

– It’s soooo easy to make money in ICOs.
– It’s a foregone conclusion that the tokens will go up in value.

Sorry, but it just doesn’t compute.

If the tokens represent ownership in a business, then the only thing that matters is whether or not the underlying business performs well.

Does the company have a compelling long-term strategic plan?

More importantly– are the managers successfully implementing the plan and achieving milestones?

Is the company on a path to financial sustainability?

Nobody seems to be paying attention to these details. They just buy tokens with the expectation that the price will rise.

And even if a business performs well, it’s ridiculous to think hat a startup company can be worth 100,000% more in a year. Or nearly 700,000% more in a couple of years.

To put these numbers in context, Peter Thiel invested $500,000 in Facebook back in 2004 as the company’s first big investor. In 2012 he sold most of it for $1 billion.

That’s a return of 200,000% in eight years… pretty tame by ICO standards.

Investing isn’t supposed to be easy, especially when speculating in startup companies. There’s supposed to be risk. Serious analysis. And lots of losers.

It’s not to say that there aren’t any good businesses issuing tokens. But it’s pretty clear this trend is a massive bubble.

Comments

  1. Lots of people did not make any money during the gold rush.

    Conversely – thousands walked out into the bush and came back millionaires.

    Yes – its a gold rush.

  2. Just wait until the real estate industry realises that if a cryptocurrency is issued for each house – the ownership of a house can be divided into tradeable microfractions.

    Why buy a brick when you can buy and trade in fractions of a brick.

    All it needs is a crypto-currency minter who buys a house and then mints a unique crypto-currency tied to the title of that specific house.

    Providing that the total number of coins for the house are subject to a specific stated number the owner can now trade bits of their house.

    Probably a good idea to lodge a caveat in favour of the cypto-currency so the underlying asset cannot be sold but what fun.

    Go to the car dealership and sell them a few fractions of your appreciating house for that hot new thing with 4 wheels and red paint.

  3. Yes. It is a bubble.

    However, even after it pops, I doubt they’ll all go to zero.
    A diversified collection of penny-shitcoins will probably do ok.

    Also, SOME of them have a business model. Ethereum has its “smart contracts” business model which is loosely called “the global computer”. Very shortly, “mining” new Ethereum will cease working and they’ll move to a deposit-interest model rather than the energy intensive mining while “selling” access to the many million computers that comprise it and rewarding them with interest.
    Sia is block-chain cloud storage.
    Monero has anonymous transactions (Bitcoin isn’t) which makes it attractive to black markets.

    H&H, I get your skepticism. Most of them will be useless forever.

    Some however, do have a business model and therefore potential customers. They could self-sustain not on pure speculation, but sales and real world products.

  4. Price without volume is meaningless, you can pump those things with $1000 and watch punters come in all excited. That’s also leaving out the fact that some of these shitcoins have 90% ownership with a few people. It’s the financial wildwest with all the worst of traditional markets on show and unrestrained.

    People investing into ico dreams are going to get burnt. It’s the equivalent of turning up to shark tank with no working product or proven team and getting $300m no questions asked.

    Crypto is a good long term bet though, much good will come from it, Bitcoin and Ethereum are solid, few others like Factom and Waves for those wanting even more risk.

    People look at you like you are crazy saying btc is a good buy at $6k, but they said that at $3000. Bitcoin is the first real alternative to the madness of current monetary policy.

    • Exactly. The total marketcap for FUCK only about $5M, which indicates it has near-zero liquidity (a significant proportion of coins aren’t traded). It’s likely someone put in a big buy and drove the price up.

      It would probably only take about $6000 to increase the marketcap of a $1.5M coin to $5M.

  5. Ethereum will be the next crypto crash. All these ICO’s have only one exit (etherum), and the price will go negative. Should be bullish for Bitcoin and anything else they can grab a hold off when the run starts

  6. guys – did you even look at the volume traded for this coin before you posted the article?

    24 hour volume of $32,000.

  7. scottb1978MEMBER

    Everyone talks of crypto crashes but this could be the start of many years of growth, only to plataeu or crash from much higher levels. As long as you risk small amounts, spread it around and diversify away from crypto if it makes substantial gains then its a no brainer to get on board.

  8. Curious to see whether this mania will take some of the heat out of housing. Specufestors migrate to the cryptos …. mmmmm.

    A mate emailed me the other day to say that he was putting some cash into a venture to ‘mine’ ETH, BTC etc with some colleagues of his. The top must be close …

    • On the other hand, if your mate has a track record of jumping on the bandwagon at the right time then he might be onto something!
      Did he/she get into SYD housing market around 2004?

      • Lol. No they did not. That said, he’s had some remarkable luck (of the dumb variety, but still)

  9. I don’t think the situations are comparable. I think most ‘house investors’ or flippers would view crypto as being equally risky as they think shares or bonds are.

    Land investment is the simplest form of investment for any human to understand. They can see it, they can touch it, and in cases they can even physically defend it (e.g. Koreans during Rodney King riots). They can improve it (turn a 3 bedroom house into a 5 bedroom house) to ‘value add’. They can understand the demand for it (people need shelter) and they can try to assess for themselves the value of it (adjacency to public infrastructure, opportunities, other similar asset sales).

    People are making silly investments into crypto, but there’ll always be fools out there and always be people trying to part them from their money. Sadly, there will be big winners. Just as with housing. If I’d gone to my gills with ‘risky debt’ in 2003, I’d be fucking working from home today. Or deep in the koolaid and have a portfolio of 10 houses. Who knows. But I wouldn’t be surprised if the people who I told to ‘sell now!’ had no interest in my opinions today. Someone did take my advice- right before the mining boom in WA. They’d be wealthier today if they’d ignored what I’d told them, even though it was true. I don’t share my views outside MB anymore for exactly that reason.

  10. scottb1978MEMBER

    Blockchain tech is going to change alot of things, not just finance. I see this first wave a bit like the dot com bubble. Lots of euphoria, lots of big gains but not much substance. The hype cycle will drop away and then the real game changers will make their mark. Big opportunity and money to be made at all stages as long as you manage your risk.

  11. Sigh…. psychology covers this territory in granular detail and some are confused why shopping malls, casinos, et al use psychological architecture.

    disheveled…. reality is someone else Scotts box….

  12. Cryptocoins are here to stay because you can buy drugs and launder money with them.

    They are great for speculation because the suppy of Bitcoin is limited. Already about 88% of all Bitcoin that can ever be created have been mined. Then, you have people losing their keys or losing access to their wallets, and destroying supply.

    • The Traveling Wilbur

      Wake me when someone gets around to regulating the following from ever being brought into existence:

      Bitcoin 2.0
      Bitcoin II
      Bitcoin v2
      Bitcoin Two
      Bitcoin X-VIII
      Bitcoin b
      Bitcoin Returns
      Bitcoin Jr
      Bitcoin Son of Bitcoin
      Bitcoin The Rematch
      Bitcoin This Time It’s Personal
      Bitcoin The Never Ending Story
      Bitcoin Never Sleeps
      Bitcoin Another One Bites The Dust
      Bitcoin Bitcoin
      Bitcoin The Squeakquel
      Bitcon

  13. Love Macrobusiness I think the articles are very good, but it’s calls on cryptos have been completely wrong, the ozy dollar is yet to sink, house prices have not slowed down, and when I traded as per their share trading recommendations I lost money.

    I don’t understand how economically the articles can appear to make so much sense, yet (sorry) the financial calls have kinda sucked. Anyone can help me out??