Reading various materials about the Ethereum has become for me an exciting immersion in the space of incredibly powerful information bubbles, among which we all live, and the financial bubbles that they generate.
Shortly before and during this period of dramatic growth, the press published a huge amount of material about the Etherium. Many companies conducted ICO (primary coin offerings), releasing their own digital coins based on the technology of the Etherium and working on top of its network. Other companies that provide services related to crypto-loans have received millions of dollars of investment in their start-ups. And the video cards, which are optimally suitable for the mining of the Etherium, have been swept away from the stores all over the world. All this was widely covered in the press.
In addition, many professional traders began to create - or try to create - their own crypto-currency portfolios. Local and national governments began to quickly introduce regulation of this industry, creating new tax codes, laws on investment or trade in crypto-currencies, and determining their legal status and the legality of using crypto-currency as a payment facility.
This is an incredible change for such a short period of time. The creator of the Etherium, Vitalik Buterin, even became famous due to the growth of the value of this crypto currency.
Many people like to make money out of money, and they are willing to invest a lot of time and resources in this, especially if it seems to them to be relatively simple, and the benefits are significant, or if they think they are ahead of the rest. Compared with this intuition, many details regarding the product or service itself seem to be secondary.
Vitalik's ideas really carry a transforming potential, and his software is capable of realizing this potential over time. However, its popularity depends primarily on the value it creates for investors, secondly - from the ideas that it has, and only in the last instance - from the real software created by its development team.
Interestingly, this is almost the complete opposite of the traditional value hierarchy. The idea should carry a transforming potential, be supported by a realistic software project, which should be implemented by a team of developers capable of coping with this task - and then this idea in the future can bring money to its authors.
The problem with the imbalance of information and the market is this: if you have received more than 100% of the profits from any one investment, then probably for quite some time you will believe that you know something more than people who say that you Just lucky and / or there was a certain reason why the market overestimated the object of your investment.
When you look at a financial bubble from outside, it's easy to succumb to the temptation and mix all investors into one collective image, but there are different cohorts of investors that invest in different periods of time, and within each of these cohorts there are people who adhere to different investment strategies and philosophies.
In the case of the Efirium, among investors there are people who understand the computer science behind it at the deepest level. And there are those who have a fundamental understanding of the logic of the market. There are investors who have some understanding of both aspects. There are investors who were fascinated by the ideas behind the creation of this technology. There are people who understand Bitcoin well and see the Etherium as its analogue. There are people who like the idea of free money, and who are ready to use their computers for the mining of digital currencies. There are people who want immediate short-term profit. There are people who want to get the same profit in the long term, as some managed to earn on the growth of Bitcoin.
But whoever you are, if you have invested in the Etherium in the most recent time, then probably you have experienced great enthusiasm.
A friend explained to me this investment mentality in very simple words:
'People want to buy ETH because they think they missed the opportunity to buy Bitcoin on time. They are afraid of missing another opportunity. '
Investing in a currency that is in the phase of a formed market bubble can be a very dramatic experience. The price is skyrocketing, but any day it can fall to a completely unpredictable level and never again rise to the same height. Everyone understands that they are in a bubble, but no one knows at what point it will cease to grow, and everyone hopes that it will have time to get out before others.
In the case of the Efirium, the story is somewhat different, as many investors expect that it will repeat the historical trends of Bitcoin and in the long run will reach the same value (which currently stands at about $ 2,000).
However, for such thinking there are several very important reservations, which are often ignored. Trading is a game. A zero-sum game, to be exact, although it may not always be so. In every game there are players, and many of them act on the basis of a certain set of rules and assumptions. If you proceed from the assumption that the Etherium will reflect the historical trends of the Bitcoin price change and expect that other market participants will act on the same assumption, then, for a number of reasons, each participant will sabotage the rest.
Here it is necessary to explain: Bitkoyin passed through two historical periods of explosive price growth. The first of them happened during the first year (or so) of the existence of this currency, when its price rose above $ 1,000. Then it collapsed and for about 5 years Bitcoin traded below this mark before gradually rising to a level of about $ 2,000 for the coin on which it traded at the time of writing the post.
But let us return to 'a number of reasons.'
Reason 1: the market is dominated by people who are looking for benefits, not those who understand and appreciate the currency for what it is. This means that there are no people to whom you could sell the Etherium token, except for those who believe that this currency will be more expensive than you assume.
Reason 2: if the first peak on Bitkoyn's price chart reached the level of $ 1,000, then if you are smart, you will sell the Etherium at a price of $ 999 to buy less when the bottom is formed. If you are a little smarter, you will guess that someone else will try to sell their coins for $ 999 - so you can try to sell them for 900, 800, 500 dollars and so on.
Reason 3: if you are smarter than even people who act on the basis of the logic described in the second paragraph, then you will take a long-term financial decision about the investment based on the assumption that the price of the Etherium will either surpass the current cost of Bitcoin at $ 2,000. However, there is absolutely no guarantee that Bitcoin will remain stable in the future or that he has a future in the long run. As well as there are no similar guarantees for the Ethereum. These are simply the most promising currencies from the existing on the market at present. At the same time, if this corresponds to your thinking and perception, you will buy ethers from other people. Most likely, those people who invested a lot of money in them at the earliest stage of the rally, when the price of the Etherium was about $ 40. It is advantageous for these people to spread forecasts that the price of the Etherium will reach 10,000 or even 100,000 dollars (yes, I have met such predictions). And after you buy from them ethers, it will be profitable for you.
There are a lot of other factors in financial bubbles, but these three are key to understanding why the start of a bubble, the duration of its existence and the time it bursts, are so unpredictable.
In addition, the financial market behind crypto-currencies - at least in the US - is not regulated at all (editor's note: although the situation here is beginning to change). This means that there are many classic schemes that you can become victims of, without having the usual legal protection for fraudulent practices for US residents. This means that financial organizations - such as Coinbase - can make any statements about currency trading, which is the source of their profits, not particularly worried about the legal consequences of this. Do not get me wrong: there are legal consequences for standard practices of the shadow business, but in the field of crypto-currencies today there are no additional consumer protection measures working with traditional financial institutions.
In this video, the project manager of Coinbase talks about the crypto-currencies that they sell.
In this fragment, the character of Jordan Belfort (Jordan Belfort) describes the scheme of artificial pumping and resetting the course, in which he frankly lies to potential investors with a view to making a sale.
There is a huge difference between the two videos: Adam White gives the real information, while Jordan Belfort frankly lies. The only thing that unites them is that neither of them says anything bad about what they sell, and they both promote their services with respect to what they sell.
When buying airs you will not have a list of owners of all other coins and information about their intentions.
All you have access to is a lot of information on the Internet about how the currency works, how people use it and what kind of press it gets.
If you have a high level of understanding of computer science, you can familiarize yourself with the open source code of the Etherium and make a judgment about its value based on this.
If you have a high level of understanding in the field of project organization or practical business management, you can make a judgment about the value of the Etherium based on the team that works on it.
If you have a high level of understanding of how the markets work, then you can also make a judgment about the value based on your market data.
You might think that understanding the market data will help you get a short-term profit from trading the Efirium at the stage of this financial bubble, but the results of many studies show that it is rare for someone who excels in the market timing for a short time, Term perspective. This means that even a professional is unlikely to be able to foresee the future direction of the Efirium market movement quite stably enough to make more money on successful deals than he will lose on unsuccessful ones.
For those who are not in the topic, market timing means buying cheaply, when the price has not yet started moving up, and selling is expensive when the price is at its peak. The problem with this simple rule - and why I'm a little offended when people try to pass it off as an investment recommendation - is that you can never know exactly where the price will move at the next time. You can buy cheap, and the price can go down even lower. You can sell at the expected peak, and the price - go even higher and never again return to this level. In order to constantly get profitability above the market, you need to buy below, sell higher, then buy again lower than you sold - and so on ad infinitum. To do this, you need to know how much the price will decrease or increase, and at what point in time. If you could do this, then the existence of a securities market would be meaningless.
Instead, we all get the value of a retrospective understanding. We look back to those moments when we interacted with the Etherium before, we consider our state of mind then and compare it with what we think now - and either we mentally weigh ourselves a kick or pat on the back. This type of thinking looks logical, but in fact it is the complete opposite of logic.
The correct approach to investing is not related to how you feel, whether you like to make money, or how much money you could earn if you made the right decisions at the right time.
The correct approach to investment is often associated with a much deeper understanding of any aspects of the market than other market participants, allowing them to buy assets when they are still cheap and unclaimed, and sell them when most market participants have taken up this idea. Alternatively, you can invest in a stable and durable idea and just leave your money in this asset while he takes care of himself.
The dominant opinion today on the timing of the market of the Etherium is that it is now expensive, but it will become even more expensive in the future, when the rest of the world realizes its value. I like this idea, and it may turn out to be true, but I do not have the gift of foresight to know this for sure.
In fact, literate investments are not limited to any one asset. It should be money that you invest in several funds. Each fund will invest in a group of companies or ideas. This, in fact, looks like a pension fund, which is difficult to describe as exciting or inspiring, and although such stability can make the Efirium a viable and functioning currency, this is absolutely not what interests the existing cohort of Efirium miners and investors.
I mean, who wants to buy something for dollars, if today you can buy Playstation on it, and tomorrow - just a box of sugar candies?
And who would not be happy to invest in a box of candies that could magically turn into a Playstation?
The real, long-term benefit from the Etherium comes from its ability to be used by a broad masses of people or some large and stable company.
For example, Wal-Mart uses block technology to track the supply chain from farm to dreary and destructive urban warehouses. This news was replicated in several blogs devoted to the Efirium, which contributed to the support of the general HYIP on it. But if you read this article, you'll find out that Wal-Mart used the block system developed by IBM, not the Etherium. Nevertheless, this article - or a slightly modified version of it - appeared in many news feeds of the Etherium community, where the main informational occasion was formulated in such a way as if it were directly used by the Ethereum blockade.
It should also be taken into account that even Efirium itself has several versions that can be used by the company, and not all of them are tied to the ETH currency, which all are mined and traded for.
Here I risk oversimplifying the picture, but still: the block is a distributed register, all transactions in which are verified by a peer-to-peer network of users. This means that each user knows what everyone else has done - and therefore there is no need for a central authority - such as a bank - to control everything that is happening. The main and most common form of the Etherium is a public blockade, on the basis of which a currency is created. Each computer that runs the mining is a node of the network, or a node, the block is itself public, and if you have enough nodes working together, you can confirm that the transaction is legitimate.
Alternative forms of this block can be private or have a list of trusted sites. Private blockade means that the general public does not have access to it (most likely, it's the same block used in Wal-Mart). The presence of trusted sites implies that the verification of transactions by these nodes is more weighty compared to nodes that were not included in the trusted list.
If you know anything about corporate culture, it should be quite obvious to you that most traditional corporations with large amounts of capital will prefer to invest in technologies that are easy to control, rather than in experimental technologies that are unpredictably dependent on the outside world. It seems that the first big wave of acceptance will come from companies like Wal-Mart, who will experiment with private blockers and / or lock-ups with trusted nodes.
Such kind of blockhouses can be extremely useful, but they contradict the philosophy of creating a market free of financial intermediaries, which is the basis of the Etherium and in the implementation of which many people invest their money. In addition, blockboys of this kind do not interact with the public blockbuster Efirium, in which everyone invests. In a nutshell, this means that they can use the technology of the Etherium, but in fact do not make a direct contribution to the use of public blockade, which has the designation ETH and tokens of which everyone trades.
It is worth noting that the value created through use can come from just about anyone. So, while traditional Fortune 500 companies may not add currency to immediate value, some other company can find an extremely useful and profitable way to take advantage of the public blockbuster Ethereum. But this may not happen: the introduction of technology may not be justified, or the result may be different, but not meet the inflated financial expectations created by the market of the Etherium.
When you see great confidence in a completely new technology, as in this case, you should ask yourself why it happens. It should not be a superficial question like 'Tell me why should I invest money in this?' You need to ask real questions, like 'Why do people think that it has value?', 'For how long do they invest?', 'What Do industry leaders already have plans to create viable technologies or businesses based on this technology? ',' What are the specific signs of a technology that can completely change the rules of the game? ',' Are there weaknesses in this technology? 'And' How can it fail? '
When I asked these questions, I basically received only the answer: people believe that potentially the Etherium will be better than Bitcoin. Often they could only answer about 40-80% of my 'Why?' And they have no idea how this currency will replace the existing financial markets - they just do not like the existing financial markets as a whole.
Source: author