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Is FOMO The Real Reason For Bitcoin's Run-up?

SA Investing Groups profile picture
SA Investing Groups
17.65K Followers

Summary

  • Bitcoin’s price has increased roughly 814% over the past year - what gives?
  • John Rhodes, author of the Digital Coin Collective on Marketplace, joins the Roundtable to explain what the hype is about.
  • Understanding the complexities of cryptocurrencies is hard. Investing in Bitcoin is easy, but it isn’t for everyone.
  • One thing's for sure: Cryptocurrencies aren't going away. So how can investors reap the benefits? Read on to find out.

To say that Bitcoin has had a banner year would be an understatement. According to CoinDesk, from November 14, 2016 to November 13, 2017, Bitcoin experienced a meteoric rise in price from $706.39 to $6461.79 and climbing (at time of writing). For some perspective, in May 2010, Bitcoin was worth less than a penny. Once thought to be “just a fad” or “that weird electronic currency,” the cryptocurrency has gotten tons of love from investors - especially over the last year - which prompted us to ask the question: Is Bitcoin worth the hype?

We confess, we actually didn’t know a whole lot about Bitcoin before this Roundtable, so we decided to approach it as a bit of a “Bitcoin 101” primer. We reached out to John Rhodes, who’s made something of a name for himself on Seeking Alpha by writing prolifically about Bitcoin, cryptocurrencies, and blockchain (very loosely defined, technology that enables sharing of data, verification of information, and digital certification of assets without the intervention of an “authority,” like a bank or government entity). John is the brains behind the Digital Coin Collective on Marketplace, a service focused on Bitcoin, Ethereum and blockchain investments, along with “‘off the radar’ lucrative cryptocurrency investing situations such as initial coin offerings (ICOs), government deep think, BigCo blue chip, fintech software and services.”

John schooled us on Bitcoin, blockchain, and what it all means for investors. We learned a lot, and we hope you do, too.

Seeking Alpha: Bitcoin: what’s all the hype about?

John Rhodes, author of the Digital Coin Collective: Here’s a little background to kick this off. I first learned about Bitcoin back in 2013. Like so many other people, I laughed at it. I ignored it. I never thought it had a chance. But, it survived. It thrived. It exploded. Many people like to ignore the irrefutable fact

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17.65K Followers
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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

John Rhodes is long BTC, ETH, LTC (crypto investments). He is also long WMT, KR, IBM, WFC, BAC.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given that any particular security, portfolio, transaction or investment strategy is suitable for any specific person. The author is not advising you personally concerning the nature, potential, value or suitability of any particular security or other matter. You alone are solely responsible for determining whether any investment, security or strategy, or any product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. The author is an employee of Seeking Alpha. Any views or opinions expressed herein may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank.

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Comments (47)

glenart profile picture
Just another GET RICH QUICK SCHEME........amplified by1000% by Social Media and a public with an appalling lack of financial education.As with all GET RICH QUICK SCHEMES, this one will end very badly.......And I am afraid take down a lot of speculative businesses with it.
Spot the DJ profile picture
Just lots of PUMP and DUMP groups ..... but everyone pumping at the moment..

http://tinyurl.com/y85...
o
"Literally, the faith in Bitcoin is strong value itself. You don’t need to trust governments or Wall Street - you’re trusting math! I’m being a bit flippant here, but I trust that 2+2=4 more than I trust a Central Bank."

Same sort of math drives pyramid schemes. It's faith based investing.
J
I should spend 8000$ to buy a unique number created by a computer. No, thanks.
c
A fool and his money are soon parted
mikekeeney101 profile picture
Obviously the time to get in is now, the real trick is when to get out!
Thanks for the brain flex John.
I should probably dip my toe in the water. 2 questions:

I've heard of it being hacked. How do you keep it safe, avoid losing it to a hack?

Do you pay taxes on gains?
D Rotts profile picture
John, any thoughts on Ripple/XRP? They seem to be making a play for larger institutions. Plus they aren't $7,000+ per unit.

https://seekingalpha.c...
f
If you can use blockchain to track a piece of fruit then you can use blockchain to track Bitdollars and Bittreasuries, harder to cheat on taxes and to counterfeit. Also if you can find people who will pay $8000 for a Bitcoin, maybe the same guys will pay the same for a Bittreasury and you won't even have to pay the fools interest. And maybe get them to pay you if you can manage a negative interest rate. Just advertise how SAFE it is! Hey how to get rid of the national debt!
T
I'm sure the gov't would love your idea, and you might or might not be closer to the truth than we can currently imagine...
m
Great article very informative
John Rhodes profile picture
@mrexec454

Thank you for the kind words.
Blue & White Investment Club profile picture
I appreciate ya @johnrhodes . Its funny ppl talk about how bitcoins just a number on a screen..as are most financial assets in society. I heard about btc back in 2013 when i was underwriting senior secured 50LTV perfected revolvers when a kid next to me brought it up and naturally i thought it was ridiculous. Then in a use case a few months later - investments with strong retuns showed its utility as an exchange of value. As it shut down i expected net present utility if you will to drop significantly.

not that you have to answer to me & btw thanks for the discussion , but i dont grasp the value of ur marketplace at $2000/yr? My reasoning is based on informational asymmetry and what value added (assuming i am the type to read Nick Szabo philosophical beliefs and solving the need for a trustless transaction) provided is within the cryptoassets you speculate on? As a value-oriented expected value approach investor with a finance frame of reference and not a coding or cryptography one - i cant validate the properties that create the value to these cryptoassets.. Can you? i dont mean that as disrespect as reading your comments and i see someone very similar to myself. ( rational intj that identifies value in the philosphical including value theory).

With that being said i think the analogy of the dotcom and internet area are relevant. Reading how people thought investment fundamentals were not applicable and no asset no cash flow companies getting multimillion dollar valuations. Yes these whitepapers are rediculous, and beyond that there is no legal claim to residual value or even recourse to the gigantic agency problem.

Regarding the assets that are more probable to have a future cash flow - again im inquiring to what in your speculation of blockchain applications creates, or posses the info assymytry? WIthin your heuristics?

For instance, im trying to decide if selling my bitcoin is optimal at t leading up futures trading? I am assuming that the exchanges creating these contracts increases the probaility of short interest, and potentially in a big way. What are your thoughts on selling on optimizing identified value (mad stacks ive made past 6 months) while minimizing risk? (as its increasingly become larger % of my total assets) Ok last string of qestions - im basically thinking in terms of bankroll management at this point using poker as frame of refernce. rational to take some money off table ive run up? in that case ill lock in profit? would it be best to minimize loss function - but maximize ev?Well its5am now - trying to use this bernoulli formulation. psychologically i can feel a diminishing marginal utility
f
The problem with Bitdollar and Bittreasury will probably be the government will keep exclusive 'mining' rights. And they will be constantly mining lol.
s
They’ll just skip the mining and poof trillions into existence
@djrt profile picture
The FOMO comes when Bitcoin hits 10K
P
So does AI or Artificial Intelligence
f
The problem is there is no moat, as you pointed out there are already alternatives and some may be 'better'. Watch out for Bitdollar and Bittreasury if the government can't outlaw it. Must say though I wish I had bought some [and my wallet wasn't hacked], took profits and held a little to hope for 3 million lol. The ones early on any Ponzi scheme make money also, especially those who create them. That said the blockchain technology itself is very interesting.
sportscliche profile picture
The idea of Bitdollar and Bittreasury is completely antithetical to the concept of blockchain. Any centralized issuer -- such as a government -- using a blockchain for its products and services would be the height of folly. Blockchain tech is orders of magnitude slower and inefficient compared to what government and business are already running. And this is by design. To put this in perspective, Visa, Mastercard, PayPal, and Western Union can each process many thousands of transactions per second. Bitcoin currently does about three. Ideas being discussed to increase this necessarily push the network toward centralization and reduced security. This is the tradeoff that MUST be made to have a trustless, decentralized payment network. The only reason for using a blockchain database is to place it out of reach of a controlling authority -- exactly what a government would never do.
John Rhodes profile picture
@sportscliche

"Any centralized issuer -- such as a government -- using a blockchain for its products and services would be the height of folly."

Wrong.

==> https://seekingalpha.c...

Central Banks Love Blockchain And What That Means For Investors And Bitcoin Speculators
sportscliche profile picture
Completely disagree. Traditional banks and financial institutions are just caught up in the blockchain FOMO. Explained clearly here

==> http://bit.ly/2zqO5Cy
P
John Rhodes thank you for an informative article. My plan is to buy Ethereum. I believe that combines more with my personality! That being said, one thing I absolutely know for sure is that bitcoin fits Clayton Christensen’s definition of a DISRUPTIVE INNOVATION PARADIGM.
John Rhodes profile picture
@Patty9736

Thank you!

My true investment in this space is in the disruptive innovation paradigm. You're on to something there...
Vineet Dhandhania profile picture
Duh
Buyandhold 2012 profile picture
You mean I could have bought Bitcoin for one cent in 2010 and sold It for $7,300 in 2017?

730,000 times my original investment in 7 years.

That sure beats the hell out of General Electric and even Amazon.

If I had known that. And I didn't because I do not watch the Psychic Friends Network. I would have invested $100,000 in Bitcoin for a penny each in 2010 and then sold it for 73 billion in 2017.

After taxes I would be left with about 30 billion. And my life would change completely. No more senior citizen coffee specials at McDonald's. From now on, those expensive brews at Starbucks. And no Alexa from Amazon. I would hire a real human being named Alexa as my personal assistant. As long as she looks like Sofia Vergara, she's got the job. My wife, of course, would prefer it if I hired a personal assistant that looked like the Supreme Leader of North Korea. But billionaires have their privileges.

Bitcoin is too expensive for me now. When it falls back to five bucks, I may buy a few.
b
one of the best comments I've read in a while!
John Rhodes profile picture
@Buyandhold 2012

Always appreciate your input and good humor.

Thank you!
U
Buyandhold 2012 :

Yes, I'm in complete agreement with you that the first thing I'd do if I had $30,000,000,000 would be to stride into a Starbuck's and order the most expensive Latte Macchiato Pumpkin Spice Iced Cappucino the establishment offers. Then, I would hire Sophia Vergara to sprinkle gold flakes on the foam while costumed as Shakespeare's Fairie Queene. Other than that, I don't think $30,000,000,000 would change my lifestyle very much.
Tcostant profile picture
I remember my nephew telling me about Bitcoin 5 years ago at a holiday party, he told me invested and had already doubled his money. I thought he was crazy, but a few years ago I asked and he still owned it. I hope he still does, but I just can't consider it. Thanksgiving should be fun, guess who I'll be talking to?
F
well? dont leave us hanging
Oracle of NJ profile picture
Bitcoin will go to double or single digits once the bubble bursts. Tulip Mania. Google it. Everyone believes until the music stops...

Blockchain has some value but that is not relevant to the discussion of bitcoin in any way
s
Tulips were worth the equivalent of over 2 million dollars at their peak. So even if the tulip comparisons were valid, we are a very long way from that level of mania.
a
The mindset of a bag holder.
MNdothemath profile picture
Tulips were over 2m at their peek: Yes - but did you know tulips were 10,000 bitcoins each....they were on sale.
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