Tokens, Blockchain, and Bubbles

Over the last year or so I’ve delved deeper into the blockchain and cryptocurrency space as well as a couple other related businesses. Lots of travel. Lots of meeting people.

There’s no other segment of the market right now with so many young, smart, higher energy people focusing their efforts.

I have a couple of thoughts I wanted to share as recent price action in Bitcoin, Ether, and Altcoins/Tokens have torpedoed higher.

  • I don’t really think of this market as a traditional “bubble”. This feels more like a relatively immature exchange network straining under the pressures of global attention. There’s a big difference. The good news is that it’s straining to the upside :-)
  • A useful mental model when the product and the asset price are inseparable: Bitcoin, Ether, and even Altcoins/Tokens can be thought about as new open source global brands. They have utility for everyone on earth. Are accessible by everyone on earth because of near infinite divisibility (you can start with $0.50). So everyone on the planet can be a customer. Has this ever happened before? The advertising budget in terms of total media coverage of these open global brands rivals Fortune 500 companies and is mostly free. Awareness is far from universal, but it’s RAMPING UP. Imagine any other emerging global brand as it deals with a surge in popularity. There will be empty shelves as distribution catches up. It’s super exciting, but it can also piss people off.
  • Institutional investors are just starting to dip their toes into crypto asset ownership (again). They operate on a different scale, move markets, and don’t have the same concerns as the daily active users/traders. This can feel a little dislocating and seem like a bubble. Supply/demand issues are not de facto bubbles.
  • Markets need this type of price action to stretch and grow. Fun fact: lots of early crypto developers are rich now and don’t need to work. Technical challenges to scale can be motivating.
  • Good news: Decentralized systems can self-address these growing pains if politics (internal and external) don’t block the way, and regulators have a light touch. These markets can grow both wide and deep and have a dynamic nature to them the world has never seen before.
  • Even if this market isn’t technically a bubble (yet), the price volatility might be indistinguishable from a bubble. So be careful out there!

I’m going to be writing more about this space in the future.

Comments? Shoot me a note on twitter @dynamichedge

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