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Crypto Hype

Summary

My schoolmates and natives buy crypto currency is that a sign of a bubble?

Why am I sceptical on digital gold?

Is there a hedge?

Almost everyone I know who has no idea how crypto currency  works has some cash invested in it. I do never regret not taking the opportunities that market gives me because I may see it differently or just simply do not know enough about the subject. And that is true with crypto currency - I know that it has some unique characteristics but I really do not feel inferior to say: "I do not understand this asset". But after 4 years of trading I saw too much to think I missed something.

I saw stocks pumping 10 000% and more in a day and the day after trading at price close to zero. It is pump and dump strategy that almost every trader is familiar with. So what happens to crypto currency I think is similar to pump and almost guaranteed statistically that we will see dump in a while.

I am sceptical on digital gold because:

1. It pumped 1 740% in 2017;

2. Too many people that are far from the market have cash invested in it;

3. It has limited supply, so when it will run out most people will be forced to sell their coins;

4. Not for the real sector with such a price volatility meaning buying ice cream at 2$ on Monday and 6$ on Friday;

5. Unregulated - delivering many opportunities to "digital pirates" and criminal overall.

But if we assume that prices are on their intrinsic levels whatever they are, we can not value currency because it is just the measurement mechanism, then crypto-currency can be a really good hedge against the paper money (dollar, euros - you name it...). So when there is lack of trust to "classic" money, proved historically, gold (gold miners) was a good hedge against that so when dollar drops - gold can show very huge returns while gold miners can even double, triple etc. in a very short period of time. Speaking of digital gold I think it can be used for the same reason - to hedge investors portfolio.