David Hargreaves says the hype around Bitcoin and other cryptocurrencies is obscuring the likely huge future impact of Blockchain technology
I’m not sure if anybody has publicly stated this as such, but I can confirm that the total market value of the world’s cryptocurrencies is now bigger than New Zealand’s GDP.
Our GDP as measured in American dollars last year was US$185 billion, while the cryptocurrencies in aggregate are now ‘worth’ in excess of US$200 billion. Or at least they were when I started writing this. By the time I’ve finished, it’s even odds that the market cap will either be less than US$50 billion or in excess of US$500 billion. Well, that’s tongue in cheek, but yes, they are a bit volatile like that.
I can’t recall where I read it, but earlier this year I did read some missive describing the stages of the cryptocurrency market and where it was in terms of the investment cycle. At that stage it was said to have moved on from the very ‘in’ nerds who knew a bit about the subject to some bigger corporates and investors. This was seen as the second stage in a three-stage cycle.
The third stage of the cycle it was said, would be when ‘the public’ discovered cryptocurrencies and began flying into the market. We appear to be there now, which is why the subject now deserves much broader attention and yes, I would say, concern.
I was disconcerted to read the comments stream on one of the online publications spruiking cryptocurrencies last week and see that groups of younger people are now clearly seeing this as a get-rich scheme and climbing in.
These people are expressing the view that the price will go up and up. People are on there making boastful comments about how ‘easy’ it is to buy in the dips and sell at the peaks of the prices. Next stop US$20,000 for the Bitcoin price. Easy. You can’t lose.
We now really do have the gigantic ‘Ponzi’ effect taking place whereby the value of the cryptocurrencies is being pushed up and up by the inflow of new money into it. People who have been in the market for a while are benefiting from this infusion of new money and are undoubtedly making some quite stupendous profits. Classic Ponzi structure.
How much do the new people who are climbing in at these price levels really know about what they are buying? That’s my question.