Is There a Cryptocurrency Bubble? Just Ask Doge.

from NYTs

Jackson Palmer no longer thinks it’s funny to imitate Doge, the internet meme about a Shiba Inu dog whose awe-struck expressions and garbled syntax (e.g. “Wow. So pizza. Much delicious.”) made him a viral sensationseveral years ago.

But if he did, he might channel Doge to offer a few cautionary words for investors who are falling for cryptocurrency start-ups, Silicon Valley’s latest moneymaking craze:

Very bubble. Much scam. So avoid.

Mr. Palmer, the creator of Dogecoin, was an early fan of cryptocurrency, a form of encrypted digital money that is traded from person to person. He saw investors talking about Bitcoin, the oldest and best-known cryptocurrency, and wanted to find a way to poke fun at the hype surrounding the emerging technology.

So in 2013, he built his own cryptocurrency, a satirical mash-up that combined Bitcoin with the Doge meme he’d seen on social media. Mr. Palmer hoped to use Dogecoin to show the absurdity of wagering huge sums of money on unstable ventures.

More here.

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7 Responses to Is There a Cryptocurrency Bubble? Just Ask Doge.

  1. Adam Rakowski September 29, 2017 at 5:07 pm #

    The whole cryptocurrency phenomenon all started with the Bitcoin because of its ability to anonymously purchase merchandise. Because it has no link to and country and is therefore not subject to any type of regulation, international payments and purchases are much cheaper and hassle free. The bitcoin is more than likely a small-business favorite because it also eliminates any credit-card fees and is a great item to invest in because of its rising value. Since its conception, it has been quite easy to purchase bitcoins through sites such as Mt. Gox which considers itself to be the largest bitcoin “exchange” by using standard currencies such as dollars and euros. Now the question is: How are these bitcoins stored and how are the buyers safe from hackers? Well the current security measure used are “digital wallets” which of course, exist either on a cloud database or the user’s own personal computer. The only real problem with his method is that the FDIC is incapable of insuring bitcoins since it technically doesn’t “exist” as a form of raw currency. In return for this method of storage, the buyers of bitcoin are never required to reveal their identity of any kind other than their virtual wallet ID number. Bitcoin has since made itself notorious because of the illegal purchases made with it.
    Cryptocurrencies are the current rage of all investors because of its undisputed momentum judging from the the triple and even quadruple gains made on Bitcoin and other providers such as Ethereum. Since there is no government backing and no particular regulation, there currencies are moved on very light whims of emotions and currently: optimism. We can only hope that his optimism continues to push the bitcoin into the stratosphere and keep the bubble afloat.
    Just like the internet itself, the bitcoin embody the entire concept of innovation and the chance of it being more innovative than it already is is consistently increasing. But with great power comes great responsibility, so if one asset crashes, the downfall will inevitably spread to other ones with bursts the bubble and creates a huge wobble in the financial system. It seems only logical that people confident enough in buying cryptocurrencies are sentient of the risks and contagion is very much unlikely. I’m making the claim that the cryptocurrency is one of those particular cases where the bubble is healthy for now and if regulators watch and maintain the activity of currencies like bitcoin for illegal activity, criminal transactions such as drug deals should be kept to the minimum because being to aggressive can only lead to the chance of pricking the bubble and as a result, losing any of the potential innovation that could have persistently been developed.

  2. Henry Steck September 29, 2017 at 5:40 pm #

    Cryptocurrency was one of the main financial trends of the summer, with some investors making out like bandits with Bitcoin and other digital currencies. I saw friends walk away with thousands Some of the top financial thinkers, such a s Jamie Dimon have vocalized their concern for the asset class, similar to Dogecoin creator Jackson Palmer in this article. I agree with the Goge’s wisdom in this article: Very bubble. Much scam. So avoid.

    Dogecoin, originally a satirical creation, has now grown to a level where even Palmer feels that the sum of funds investors are wagering on the cryptocurrency is absurd. I witnessed Bitcoin and other cryptocurrencies go from nearly worthless to thousands of dollars per coin. This was all during a period of ridiculous brevity. The article reports that Dogecoin’s current total market size has swelled to over $400 million, large enough to attract a wolf pack of scammers and hackers who have defrauded many investors. Unsurprising if you consider how loosely regulated cryptos are. From a regulatory standpoint, crypto is virtually unregulated here in the US. As the article reports, the SEC has warned investors about so called “ICOs” or initial coin offerings. The lure of new and emerging technologies has been in the arsenal of scammers since the beginning of time.

    Offshore, things are different for crypto currencies. The US Treasury to create its own cryptocurrency, a move which would render Bitcoin and other cryptos virtually worthless. In places like China however, governments are on the attack to stop the non-taxed transactions which cryptos promote.

    A few weeks ago Beijing banned all fundraising through ICOs and ordered many Bitcoin exchanges to be shut down. Experienced investors have defiantly continued trading cryptos in China through peer-to-peer markets to avoid exchanges under the scrutiny of the government, but the crackdown has scared away large amount of less-experienced investors from the trade. Bitcoin traders have also been forced on to highly encrypted forms of messaging to avoid regulatory scrutiny. In the short run things are likely to continue this way, because users are anonymous and hard to track down. An arbitrage opportunity has arisen in the short-run, with Bitcoin trading at a discount in China compared to elsewhere. Any volume trading OTC platforms has more than doubled in recent weeks, hitting an all-time high in the week of September 23rd at 115 million Yuan per day in trades. The price of Bitcoin tumbled as much as 8% when the crackdown was announced in early September.

    “The fact that bitcoin is still being traded is an indication that China isn’t looking to eliminate them, but reposition things in a way to have better control over them,” commented Marshall Swatt, founder of New York-based Bitcoin trading platform Coinsetter to Reuters. Other online currencies like Etherium have seen a spike in popularity in China, with signups flying in for OTC marketplaces that have just opened in China. These other cryptos could face the wrath of the Chinese government soon as well though.

    My takeaway from seeing how the crypto market has developed over the last year or so has been a strong sense of caution regarding the asset class. Anything OTC has the possibility of creating squeezes and arbitrage like in China, and where its Bitcoin or Dogecoin, there are always criminals looking to scam you on every turn. There is also just so much room for government regulation of cryptocurrency and even the creation of official government cryptos which could allow taxes to be taken.

    Dogecoin could someday have its value zeroed out overnight. Look out.

    Works Cited:

    https://www.reuters.com/article/us-china-bitcoin/chinas-bitcoin-market-alive-and-well-as-traders-defy-crackdown-idUSKCN1C40QD

  3. Arielle Fortes October 20, 2017 at 6:13 pm #

    Technology for us, is one of the best advantages to the human race and have continually helped us throughout the years. However, sometimes we tend to overuse our technology and can actually hurt ourselves by doing so. Everyone has used money before and has some form of money that has been issued by the government that the person lives in. There are many examples of currency that people use in today’s world, there is the dollar, the euro, the yen, and much more. But have you heard of online currency or cryptocurrency? This currency is something that that is much like the currency that is made up of paper and that we hold in our hand but instead it is used online.
    There has been cryptocurrency use for longer than people think has been more well-known in certain circles than others. However, this can be extremely, dangerous. One example that was given was the Doge coin which someone originally made as a more of satire. It was a cryptocurrency that was inspired by a certain meme which a dog made a funny face. So they decided to make it into a form of cryptocurrency originally as a joke, to poke fun at how many people gamble their money on many different unstable ventures. However, the market value on this coin at one point went as high as four hundred million. However, due to the greed there were multiple people who took advantage of the popularity of this coin, and defrauded investors. So the coin lost a great deal of money as did the originally people who put money into it However, according to the creator of Doge coin warn that what has happened to his original creation is going to happen to the rest of the industry. I believe that this idea is very true and I agree with it. The industry is so unstable and it is extremely easy for people to take advantage of it. There are people who can scam people out of their money which they wanted to put into a certain coin. There are hackers who can go into the online wallets with these coins and steal lots of coins which are in reality worth a lot more money than many people think. And the celebrities endorsing the coins are part of the reason for this problem. Celebrities are people that many people emulate and wish to follow. Therefore, when a celebrity endorse a certain coin then more people will want to buy it because a celebrity is buying it. However, when this happens then it is the perfect target for more scammers and hackers to take advantage of the huge amount of people and take their hard earned money that they put into this venture. Since there is celebrity influence it draws more people in, so when the bubble pops it will have a bigger affect due to the fact that more and more elope are interested in this idea. Despite the logical viewpoint of many people. Due to the fact that there are many people who got rich quick this way. More people are buying into this idea. So some people are using another way with cryptocurrency that is called an I. C. O. where people buy into a company and receive tokens for it but not the company. Someone programmers made thirty-five million for their project in less than thirty seconds. When stories like these come out it only benefits the hackers and scammers who can make more money because of the rising importance of the cryptocurrency. And when all these people lose everything, the best benefits will be going to the hackers and scammers.

  4. Jeremy Daniels November 10, 2017 at 2:23 pm #

    Cryptocurrency is a scary phenomenon. What originated as a method of math and coding experts testing what they could do with data and formulas has spiraled into a market with questionable star-ups and even more questionable investors. Multiple variations exist, and they all continue to exude financial success. The rate at which these I.C.O.’s have been able to fundraise is staggering, and there is no proper way of regulating it. Millions of people are essentially spending money to print virtual money. Celebrities only add fuel to the fire by practically endorsing it, increasing the number of users and its value.

    While I understand the potential return on cryptocurrencies, I have no desire to try it. The fact that anyone with the right algorithms and sufficient knowledge of coding is capable of creating their own currency baffles me. Bitcoin is the one most commonly associated with drugs, weapons, and other illegal activities on the dark web, but it can’t be the only one involved. Dogecoin, Ethereum, and other altcoins also play a role. Aside from having the value of altcoins change, another important use for these currencies is tax evasion, an issue that has come up several times within the past three years. However, it still remains unregulated by the government, perhaps because of the markets likeliness of crashing in the near future. When that happens, it will be interesting to see how many people will be impacted, and to what degree they invested in these anonymous bytes of data.

  5. Isabel Grullon Ramirez November 11, 2017 at 6:59 pm #

    To understand the danger of cryptocurrency, it is important to understand the definition of money and why it came into existence. Money only has as much value as the trust we place in it. Here lies one of the problems with cryptocurrency, there’s no control or regulation of it. As the article highlights, there is no way to make claims of fraudulent transactions. When a new cryptocurrency start up needs money, they do it through an initial coin offering. I.C.O ‘s are they are known, are a risky venture, as there is no regulation and as the article points out “fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams.” An example of this would be the scammers and hackers who defrauded investors and left many currency’s original backers empty handed, as the article points.
    Initially, cryptocurrencies were used to buy illicit goods on the dark web. Cryptocurrency can lead to more exposure to scams, and more people buying illicit goods as there’s no way to track transactions. While I.C.O’s finance new enterprises in the end, what is their worth? Given that cryptocurrencies are not widely accepted as a means of payment. If a company has all its assets in cryptocurrency, if the cryptocurrency falls, they will lose their assets. Although regulators seek to enter the cryptocurrency market, many dollars still seep into the market. This could mean that the market for this kind of currency could be regulated and become safer for investors.

  6. Kunj Darji January 26, 2018 at 7:33 pm #

    Great question and also very timely.

    The cryptocurrency total market cap recently experienced ~20% decline from all-time highs and hovers around $95Bn. For comparison, the combined market cap three months ago was around $25Bn. To analyze if we’re in a bubble let’s look at two things:

    What caused asset prices to soar in the last 3 months?

    In early April, Japan recognized Bitcoin as a legal form of payment. This gave it legitimacy in one of most developed economies in Asia and significantly increased the demand for Bitcoins in Asia.

    Also, around the same time, there was a surge of Initial Coin Offerings (ICOs) – which in most cases are purchased using Bitcoin or Etherium, as opposed to fiat currency.

    If the increase is justified.

    In the past few years, Bitcoin soared twice reaching record-highs in a short time frame – once in 2011 and later in 2013. Both times the price ended up dramatically correcting. In 2013 it went down to around $250 from a high of ~$1,100. If history repeats again, the recent surge in Bitcoin’s price is likely to correct as well and we have seen ~20% decline from all time highs already. However, given the limited supply of Bitcoin, I think over the long term it could double in price if more merchants and people adopt it as a form of payment.

    However, what’s interesting, if you purchased Bitcoin at its peak in 2013, you would have about 2.5x return assuming Bitcoin prices around $2700.

    To answer your question, yes, we are likely in a bubble in a short term; however, over the long term, there is room for the price to grow beyond all time highs.

  7. Nathaniel B March 1, 2018 at 12:06 am #

    In the tech world, and probably in current events and business, Bitcoin was arguably one of the most commonly used words in 2017. It seemed as if every time you check the news there was something about Bitcoin. Bitcoin is an old cryptocurrency which exploded in 2017 which is why it gained so much media attention and popularity, and therefore gained value as well. As for Cryptocurrencies as a whole, Bitcoin, Etherium, Litecoin, Ripple, Dash, and many more that seem to be popping up everyday, the question is often asked, is it a bubble? The bubble in this case referring to something that gets bigger and bigger and eventually pops, such as the cryptocurrency market. Mr. Palmer, creator of DogeCoin, a cryptocurrency originally created as a joke strongly warns users and investors of coins of the possible bubble burst. I believe that someone such as Mr. Palmer has the authority to speak and give reliable advice on this topic because of his experience watching his own coin gain popularity and benefit charities before falling apart. As mentioned in the article, the dot com boom should serve as a sign to what may be to come for the cryptocurrencies.
    While I think he has many valid points, and some successful currencies may crash, I do not think the industry as a whole will crash any time soon. There are some long lasting cryptocurrencies that have a solid foundation and will likely last longer than many of the other rapidly appearing coins. However, one thing that I do think may affect the industry, for better or worse, could be the regulation of them by the government. It is indeed a risk to invest in something that is not backed up by the government, but so far it has been legitimately working for people. We saw a major hit to Bitcoin’s prices when China began regulating portions of the cryptocurrency industry. I think that even if government authorities step in, the cryptocurrencies will still be strong for two reasons. First, people will be more confident in investing, assuming the coins can get along with the government. Or second, certain cryptocurrencies will simply move from the market to the black-market, gaining value in the process as with any black-market item.
    Finally, I do think it is important to mention that while some consider investing in cryptocurrencies risky and short term, or a way for fast cash, it is also a way to make a serious amount of money. If you spent $1000 investing in 10 Bitcoins at $100 each in June of 2013, the value of those coins today would be over $100,000. Many coins fail and few gain this sort of power, but at one point Bitcoin was worth only a few cents.

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