The cryptocurrency hype and bubble isn't a new thing for me. I've seen it through the dot com bubble during the time I was a student and hopeful of my future. The bubble burst just as I graduated and I found myself holding an expensive certificate for an industry that people were getting out of. As a network engineer majoring in programming, I found my hourly rate was $2.20. I remember telling the interviewer that 7-11 paid more and he nodded emphatically.
Your grandpa would probably remember the 1929 Wall Street Crash if he was still around. That was the beginning of a 12 year long depression. The signs were similar: excessive speculation, followed by a mini crash as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation. Confidence dipped. People panic. Boom. Every toppled over like a house of cards.
I'm willing to bet my left ball that cryptocurrency is headed the same way. The early movers, the risk takers, the visionaries, will be the one to make their new fortune. Wealth changes hands.
When it comes to money and the financial market, I place greater emphasis on understanding social behaviour than I am of reading candlesticks. One book I highly recommend every newbie cryptocurrency trader to read is Ralph Nelson Elliott's book titled Nature's Law: The Secret of the Universe.
The Elliott Wave Principle talks about 5 wave characteristics that reflects the psychology of the market. If you want to forecast how the future will look, just study what history has thought us.
A fellow cryptocurrency trader, Roger Bryan, believes that we are in the second wave and it's marked by the following characteristics:
- Amateurs will buy at the highs (chasing their dreams) and sell at the lows (to pay their bills)
- Institutional investors will start to buy large blocks of the most valuable assets (with real tangible value). Or they will issue their own assets (Tezos Coin).
- Many of the early ICO companies will start to fail bringing panic and more selling.
- Prices will bottom and stay stagnate for 6-12 months (we may be in the start of this).
- Regulation will change the landscape of the industry to 'protect' people from their own stupidity (say goodbye to the ICO for smaller companies).
- Then the third wave will start. This isn't necessarily a good thing. The third wave will bring all time highs and then 80-90% losses in many of the assets.
Third wave theory will display the following characteristics:
- 80 to 90% of all assets will go to zero
- The dominant assets with real tangible value and revenue generating business will survive and then thrive
- The amateur investor will get crushed and jump out
- Institutional investors will own 80% plus of the assets
- Index funds will take over
Fourth wave theory starts with mass adoption and normality to the markets. Regulations get slapped down to prevent fraud and scams. Everyone gets a chance to invest in coins like you do in equities today. No more overnight Lambos.
The trends listed above aren't meant to discourage you. This should in fact motivate you to get in the game while there's still very strong opportunity to make some money. If you educate yourself instead of blindly following trends, you can save yourself a lot of heartache. For anyone over the age of 30 this might be the biggest investment trend opportunity you'll see in your lifetime.