About a week ago a friend of mine asked me if he should buy some Bitcoins. Before I could even give him any sort of an answer, he started trying to impress me with his incredible “knowledge”. He told me he would definitely prefer physical Bitcoins because if his computer was hacked they would still be safe. At first I was not sure if he was maybe trying to pull some strange kind of prank one me or if he actually meant it. It turned out he most definitely intended to buy physical coins should he decide to enter the market. The reason my friend was so sure these physical coins must exist was the images he had seen in various articles. Many of them contain an image that might indeed give some people with zero knowledge the impression that there is such a thing as a real Bitcoin that you can actually hold in your hands. I told my friend to stay away from any sort of cryptocurrency investment whatsoever.
Well, I admit this is an extreme example but there is some interesting piece of information hidden in this little story. It is blatantly obvious that people who do not know anything substantial about cryptocurrencies are now entering the Bitcoin market in bunches. The fools have arrived to join the party and this is a major red flag! A good rule of thumb says you should no longer buy an asset when everybody around you has started talking about it. We have reached the point where people who have trouble turning their computers on and off are now going all nuts and crazy about Bitcoin. You can virtually see the dollar signs in their eyes. The prospect of getting real rich real fast makes them lose their last bit of sanity and dignity. If the rumors are true to any extent and people have indeed started to even sell their properties in order to buy Bitcoins, then we are definitely talking about a market which has gone completely insane. Do you really want to join these lunatics? Feel free to do so. Just make sure you have some money left over for a cyanid pill. You may need it pretty soon.
The whole Bitcoin market is now turning into a gigantic Ponzi scheme. A Ponzi scheme is basically a game where more and more players are necessary all the time in order to keep the scam going. New participants are needed at an exponential rate. Exponential growth is the fastest kind of growth there is. If you did not listen to your teacher in math class, just take a look at an exponential graph and you will certainly get the picture. In nature, only horrible things grow at an exponential rate. Nuclear explosions and avalanches are some good examples. The Bitcoin market of course is not a Ponzi scheme by nature, it is really just a market where supply meets demand. However, with all the fools now arriving to play, the situation starts looking a whole lot like one. The best metaphor I can come up with is to imagine this market as a room with a limited number of seats. Each seat represents one Bitcoin and its current holder. Let's assume all holders want to double their money. They are all sitting on their seats waiting for someone to take their place by paying them twice as much as they paid. If all holders succeed, we basically have the same situation as before but the grand total has now doubled and we have a fresh set of holders. Again, everybody is looking for someone else to buy them out with twice as much money. If successful, the next iteration of this crazy game for ultimate lunatics starts with four times the initial amount. I think you get the picture. With the number one representing the initial amount involved at the very beginning of the game, this is how this sequence would look like: 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1024 and so on and so forth. How many iteration do you think such a game can last before it simply collapses? Certainly not all that many, the fools will simply run out of cash in a hurry because this sequence represents, well you may have guessed it already, exponential growth! This kind of growth is simply unsustainable.
Does all of this mean the Bitcoin price has no chance of going up even higher? Not at all! It simply is hard to predict how many more levels of total ridiculousness we are going to witness before this rocket eventually flames out. If people have indeed started selling all of their remaining assets in order to buy even more Bitcoins, then it might be reasonable to assume that this rocket is already running pretty low on fuel.
If you want to enter the cryptocurrency market you might be better off looking at other options. There are some exciting newcomers out there with far superior technologies and ideas than Bitcoin has to offer. If these newcomers where formula one cars, then Bitcoin is pretty much a carriage. That is how gigantic the difference is! The game is changing dramatically, if you want to know why, then check out my article about this topic: https://steemit.com/cryptocurrency/@mwinter/why-the-game-is-only-about-to-begin
I have also kicked off a series of articles where I present some of the newcomers I am really excited about. The first article can be found here: https://steemit.com/cryptocurrency/@mwinter/hidden-gems-in-the-cryptocurrency-market-part-1-deeponion
Disclaimer: This article only represents my personal opinion. I am not a financial advisor, so please do your own due diligence before making any investment decisions.
About the author: I am a software developer who lives in Berlin, Germany.