Bitcoin Forum

I remember the dot-com mania and hope to give some perspective into what happens during a mania.  I was burned by it, too.  I gleaned some powerful lessons from that mania, and my purpose here is to spread the knowledge.

Before I begin, let me state that if you think I’m spreading “FUD”, feel free to leave this thread.  I’m actually long bitcoins, though I’m looking to sell soon (in the next week or two).

During the dot-com mania, the Nasdaq doubled in about 5 months.  Given the recent run in Bitcoin’s price, you may not be impressed, but keep in mind that the Nasdaq market capitalization is on the order of trillions of dollars, a thousand times greater than Bitcoin’s.  Some companies in the Nasdaq did go up a thousand-fold.

Good companies with solid earnings became wildly overvalued.  As an example, Cisco, one of the behemoths of the tech space at the time grew into a crazy valuation.  Analysts extrapolated this exponential trend (that’s essentially the only thing most analysts do: extrapolate) and predicted that in 2-3 years, Cisco’s market cap would be greater than the US GDP.  Yes, they actually did that.

Despite continuing to grow earnings over the last 13 years, Cisco’s share price is basically where it was in 1998.  Overvaluation is a bitch.

Predictions were crazy like that.  People simply assumed in 2000 that the Nasdaq’s level would exceed the Dow in a year.  Keep in mind that the Dow was about 11,000 at the time. 

Henry Blodget became famous in 1998 for making a 1-year price target on Amazon of $400 when the price was $240.  He was widely ridiculed.  Yet, it reached that $400 price in a month, and went on to $1200 two years later.  (It then fell back down to $80, though over the next decade, it would exceed the dot-com peak.)

So lesson #1 is that even good companies can become highly overvalued during a mania.  Lesson #2 is that to jump aboard the train, investors will bid up the price of crappy companies like Pets.com into similar prices, and for the average Joe, it becomes very difficult to separate the wheat from the chaff.  Litecoin’s recent run-up seems reminiscent of that phenomenon (though I admit I’m not savvy enough to conclude that Litecoin is, indeed, chaff.)

The sociology of a mania is fascinating.  There were bearish commenters like Bill Fleckenstein who would warn people that the mania couldn’t last and a lot of people would lose their savings by being reckless.  He routinely got mocked on CNBC and elsewhere.  People with much less insight and experience than him would accuse him of not understanding what was going on.  Yet he was right. 

This was cult-like behavior:  rather than believing someone who was bearish had analyzed the data and come to a different conclusion, and that perhaps you could learn from this person, the bear took on a moral quality.  He was a bad guy.  One might even say he was evil.  He's probably motivated purely by nefarious intent.  If he got enough people to disbelieve, those people would convince their friends, and the whole thing would snowball. 

In that mania, the future took on a mystical quality.  It was called “The New Economy”.  In the New Economy, profits didn’t matter.  Only market share mattered.  So if there was a company with no profits, investors would say, “They’re spending all of the revenues to get more market share!” and justify a high valuation.  The New Economy also threw out the old valuation techniques.  The internet was so big that the sky was the limit.  There were no constraints.

Yet a decade later, really only 3 dot-com companies remained:  Yahoo, Amazon, and Ebay, and Yahoo is a shell of its former stature.

One of the key characteristics is that more people were convinced there was a mania in 1998 than there were in 1999.  Late in the mania, many former skeptics began to believe.  They stopped thinking there was anything out of the ordinary going on.  They bought into the New Economy mysticism.  As the Nasdaq rose higher, fewer and fewer skeptics remained.  Only believers were to be seen.

People who knew nothing about stocks suddenly became experts.  Middle class dads grew to know the balance sheets of the high flying companies and weren’t shy about offering their opinion at the water cooler.  Students boasted of their profits and contemplated dropping out of school because it was useless to be a wage slave when the market was so easy to play.

Perhaps the most vital lesson the dot-com mania taught me is that the market will keep going up until the staunchest bear throws in the towel.  I became a bear on the dot-com stocks in 1998.  The Nasdaq was about 1700.  As the market went up, I grew more disgusted with what was going on.  I saw my buddies become rich overnight and grew envious.  The Nasdaq went up to 2500, then 3500…4000.  Eventually, I couldn’t help it.  I knew it was a mania, but I couldn’t help but try to get in on the action.  My little account grew from about $6000 to $250000 in just a couple of months. 

The market peaked at 5100 very soon after I went in.  And then it all came crashing down.   At the new bottom, it went down to 1200.  I lost everything.  I know most of my friends also lost everything.  Luckily, “everything” was only stuff I invested.  The biggest losers were the ones who quit their job to daytrade, or the ones that took loans to invest. 

It all makes sense in retrospect.  If someone as skeptical as me—if the staunchest bear—buys!—then there’s nobody else left on the sidelines to bid up the price.  The lesson for today is: think of the biggest bitcoin skeptic you know, and when he throws in the towel and registers for a Mt. Gox account, it’s time to sell.

I hope this was informative.  I see similar things going on right now in the Bitcoin world—exponential price increases, outlandish predictions being made about the price, people quitting their jobs and putting all their eggs in the Bitcoin basket, mockery of prudence, cult-like behavior, mystical beliefs, etc—and I worry about the damage this mania is going to do.

This time it's different

I'm sorry you typed all that.

The important thing is that we all now know that no one uses "websites" or "the Internet" anymore.

I think a big threat to Bitcoin is that a copycat (with better features) will become more successful.  Sure, Bitcoin has all the face time and momentum going for it now, but so did MySpace back in the day.  Technology is supplanted so quickly and easily.

It helps that Bitcoin isn't really a front-end, per say, but more of a back end.  More of the HTML to the web than anything - once everyone chooses to support and use HTML, support for it doesn't really end.  It is the de-facto web language that everything else is built upon.

OP's post is good though.  Everyone would do well to keep things in perspective and be cautious by hedging their bets and diversifying their holdings.

It's bad for Bitcoin, but it's good for us.  Just don't get caught with your pants down when the Bitcoin successor is on the rise and you have all your assets tucked away as BTC :P

People that have never seen a bubble up close can really learn a lot by reading first hand accounts.

That said, the real question is this:  Are we in a bubble, or an adoption curve, or both?

Personally, I think both.  I think that the current exchange rates have a good chance of falling rapidly in the near-ish future, making this month a bubble of sorts.

On the other hand, it is getting harder and harder to imagine bitcoin not taking off and becoming the main settlement system of the world.  We are all over the damn newspapers, we are on TV, everyone is hearing about it now.  I'm nobody, and yet I've been contacted by a couple of reporters.

The dot com bubble was indeed a crazy time.  But it is easy to overlook that before it happened, no one knew what the internet was.  After it was all over, no one didn't know what it was.

adoption curve

so many people are adopting and converting to the bitcoin world

Thanks for sharing.

It is a fact that Bitcoin will reach it's peak at some point. As you mentioned, this will likely happen when the last bear has bought his bitcoins, and from there the price will go down. We don't know if it will come down a bit or a lot, but it almost certainly won't go to 0.

That moment is still very far away, most people still don't know what Bitcoin is. My friends, who are young, educated people, don't know what it is. So it will take years, maybe decades, until the last bears get into the action, and at that time the price might be who knows how high. At that time there will hopefully be plenty of places where one can spend bitcoins, so it will be much more than just a speculative currency.

One point to make is that the dotcom crash was mostly just the United States. Bitcoin is global, so there are much more people, many more bears, still waiting.

Yet very few people actually made money on it.  Certainly not the average joe.  99% of those dot-com mania companies don't exist today.  One of the intents of my post is to say that, yes, something can be super-duper awesome, like the internet.  But that doesn't mean there will be a lot of money to be made in it.

The dot com bubble happened during the birth of an entire new industry, and basically excess investment caused the companies in that space to build out capacity too quickly, before the demand was ready for it. Some of the fiber that was laid in the late 1990s didn't get used for a decade. In this way the current situation resembles the dot com bubble. The adoption of Bitcoin as a currency has not kept up with the increase in the exchange rate.

On the other hand, the current situation differs from the dot com bubble in that during the last 1990s other, non-Internet, forms of communication were not in the process of collapsing. Right now the financial system of every developed country in the world is a house of cards and it's anyone's guess which domino topples first.

The possibility exists the Bitcoin bubble will never pop because before that happens there won't be anything else left.

Either way, predicting extreme turbulence between now and when the question ultimately gets resolved is a no-brainer.

+1 to Alonzo Ewing's OP. It is very insightful. Skepticism is healthy, always.

+bitcointip Alonzo Ewing BTC0,005

It actually is possible for a bubble to increase wealth.  As the OP mentioned there were a few survivors like Amazon and Ebay that actually did make the world a better place.  And a lot of infrastructure for the internet we have today got paid for by people investing during the bubble.  So yes some good did come out of the bubble, but not nearly as much as the wealth that was transerred into the bubble.

Same thing could happen with bitcoin.  It could crash back to 10 tomorrow and the bitcoin ecosystem would be a lot more developed than it was a year ago today, but there will still be a lot of people who lost significant amounts of money getting us there.

There's a big difference between stocks and a currency like bitcoin.

Stock values are based on the idea that the underlying company will continue to grow and become more and more profitable. Eventually every company stumbles, or has a few bad quarters, and the investors flee to another stock.

Bitcoin is a completely different thing. There will eventually come a saturation point where everyone on the planet with an internet connection will be aware of bitcoin, and most will have some amount to use for buying and selling. When that happens the price will stop rising. Until then, as long as more people are becoming aware of bitcoin and using it for whatever purpose, the price will continue to rise.

thanks. that was one of the best written and informative posts regarding 'bubbles' I've read on this website as of yet

But all those dotcom crashes were things related to firms. Bitcoin is not a firm, it can never die even if the price tomorrow crashes to less than a penny.

I agree with this.  This time it IS different.  With stocks you have to "cash" out the unrealized gains for real gains to buy stuff.  With Bitcoin you don't have to cash out.  You can use bitcoins directly to buy goods.  Right now, you cannot use bitcoins everywhere but in the long term more and more people will accept bitcoins.  Bitcoin will naturally go through booms and busts, but the long term trends is up, up, up.

Yes, we may get a nasty crash tomorrow, and it's absolutely correct that everyone needs to be mindful of past manias and history. Good post OP.

And good points about valuation. On that note, I'd like to point out that we're NOT EVEN CLOSE to the sort of mania that happened in the .com bubble. Bitcoin's "market cap" (we really need a better term - no one likes my "Aggregate Fiat Valuation" (AFV) suggestion) is only $2B. If it achieves even niche global usage (even *just* black market), it'll need to be at least an order of magnitude larger. Likewise if it achieves safe-haven usage at 1/100th the scale of gold.

So, personally, I like to use relatively conservative (albeit really fuzzy) "fundamentals" numbers to put the parabolic chart into perspective against the process of bootstrapping the world's first global currency from zero.

This.

Not even close is right.  The Dot-com bubble had $1.3T invested in the publicly traded internet companies.  So, we need another 500x rise to get there.

Great post, Alonzo, and thanks for sharing your story.  Some will heed your warning, and others will not.  maybe Bitcoin is different.  Then again, maybe it's not.  Maybe this is a bubble.  Maybe it's not.

I'm personally long on Bitcoins, but your suggestion of being reasonable and cautious is a very good one.

Nice post OP! Although I was quite young at the time, I bought my first stock in 1999 and remember vividly the mania as you describe it. The thing is, it was cheaper at the time to put my money in an fund consisting of various internet stocks and through the last 14 years, it didn't lose much of it's value (although obviously I could have invested it in something better).
 
I believe that an investment in Bitcoin, as a currency/commodity is much more safe than investing in a single company. There might be a period of stagnation ahead, as in late 2011/2012, yet we are still nowhere near Bitcoins maximum potential. Compared to the internet, this is 1995.

Thanks Alonzo for your level-headed post.

I'd also like to add that other bubbles (like the real estate bubble) were caused by the Federal Reserve keeping interest rates too low for too long, causing malinvestment. In fact these boom/bust business cycles that bring us recessions and depressions can be avoided by taking the central banks out of the picture.

With Bitcoin, there is no danger of this kind of manipulation.

I enjoyed your post, but this is false.  Thousands, perhaps tens of thousands of new millionaires were minted.  I personally know several who made a fortune during that time.  Some may have blown it afterwards, but that's another story.

And while I appreciate with the message behind your post, I also think your timing is off by a year or two.  We are at the *very* start of this Bitcoin mania.  Plus, there's a critical difference between Bitcoins and dotcom stocks.  It wasn't the case that with each new dotcom stock owner, the dotcom boom became a better system.  But in the case of Bitcoin, each Bitcoin adopter increases the network effect, which is critical for currencies and payment systems.  So if the worst thing that happens is that Bitcoin is worth $300 after 10 years, then it will be a huge win.   Flat earnings are a bad thing for Cisco, but for Bitcoin flat "earnings" would signal the consolidation of its place as a global currency.  

Nonetheless, I personally think it will go up to somewhere between $1000 and $10,000 before it levels off, but then again that's what I've thought for several years would happen if Bitcoin were ever to gain mass adoption.  So if Bitcoin is gaining mass adoption -- and I think it is -- then my instinct tells me it's still massively undervalued. This is why there is such upward momentum now.

Finally, Bitcoin has already survived one crash.  If another one comes, only one thing will be different this time for me and many others, which is that I'm pouring money into it if that happens.  Because I spent a lot of Bitcoins toward the end of last year, I got caught with my lowest Bitcoin holding in 2 years when the price started to rapidly rise a few months ago.  I won't let that happen again, for sure.

No one should be faulted for liquidating some of their holdings at historic highs; if I had a deep wallet I'd be selling 5% a week, and holding onto 50% regardless.

Let us say that you moved from the US to Mexico and in the process converted all of your dollars to Pesos.

Now, let us say that for some reason the Peso started rising against the dollar quickly. All of the sudden your Pesos are able to buy more than you were able to previously and the dollar is losing value.

Do you now convert all of your Pesos to dollars? Or do you just keep your Pesos and use them as currency?

Mmmm... why do so many people keep coming up with this pretentious negative posts. Quite frankly, I invested a relatively small amount of money a couple of weeks ago and right now I'm staring at a 6 fold. I could easily sell a sixth of the bitcoins I own and be immediately at zero risk of loss. What would I say to such posts as OP's in that case?
Also, we're talking about speculative markets with rather big flutuation, people do now that profit is only possible by commiting to risk, heck that is ultimately the definition of market.

I don't know why I reply to this threads, I think it's because I'm high on this insane bitcoin increase of value.

With all seriousness, I think OP, like many authors of such posts, are either:

1. Giving a shot at trying to elevate themselves as fancy market analysts or whatever their fantasy is. It's like buying bitcoins, but instead of risking loosing money you risk looking ridiculous if the values keeps climbing. And instead of earning money you are in for a dumb feeling of acomplishment and being able to say "I told you so".

2. Jealous that they are not in, but at the same time uncaple of admitting so.


Gee, let people gamble a bit, will you? Why do you care so much about others anyway? I couldn't give a rats ass about people that got burned during the dotcom bubble, shit happens. If it would happen to me I'm sure I would sort it out, but I'm not sure how simpathy random people on the internet would help.

A characteristic of a bubble is that enthousiasm grows into greed, blinding everyone to the downside and promoting unrealistic expectations. In 2000 stocks went from $2 to $120, and still people cashed out everything to put it all into one stock expecting it to go to $400.
Bubbles don't really happen when the market is just weathered investors, the more fool money comes in, from people with no stock experience, the more the bubble gets blown up. Those people are going to be sorely dissapointed soon.

This is a fascinating insight that I haven't seen mentioned elsewhere.  Our collective concept of what a "bubble" looks like is directly coupled with central bank manipulation, so to use the term in the same sense shouldn't actually apply to bitcoin.

That's not to say bitcoin isn't possibly overvalued at the moment.

I'm not quite following. So you're saying some greedy guy took his savings, say 50.000 usd and bought  25.000 stocks of some dot com at $2. Then after a while he had (acording on you) 3 million dollars worth of stock. I'm confused, are you seriously suggesting he didn't buy a house, a car, a fancy ring to his wife, I dunno, anything that could worth 50.000 in the mean time. I mean, would he walk around without 50.000 in his bank account but with 3 million worth of stock?

If you buy at $2 yes. But these things gain media attention after a large rise already, the majority of the dumb money bought those stocks at $100, looking back at that tremendous gain and fully expecting it to go to $400.

Firstly good post OP.

With regards to this Wormbog it only works if people treat BTC like a currency instead of a stock. The unknown in the current equation is how many people are using it as a currency and how many people are using it as an investment vehicle. We can argue over who is right or wrong with the figures, but regardless, if people are buying it mainly for speculation your first paragraph applies exactly to bitcoins.


To paraphrase you...

Bitcoin values are based on the idea that the underlying concept will continue to grow and become more profitable. Eventually every currency stumbles, or loses a little bit of value, and the investors flee to another investment.

Didn't Mark Cuban make a billion on some sports website and buy the Mavericks?

Investing in bitcoin is nothing like investing in a dotcom business.  It's more like investing in TCP/IP before websites exist on the internet.    :)

That's the thing with speculation. Bitcoin price has shot up because we know, in a best-case development scenario, one bitcoin could easily be worth $100k+ (in terms of today's $ purchasing power) or even more. So there is plenty of speculative demand. The problem is, BTC isn't worth $100k+ now. How patient is the new speculative money flowing in? Are the investors willing to buy and hold long? Believe it or not, some people actually spend BTC as a currency, yes, even during this period of quasi-hyperdeflation!

the major historical manias had nothing to do with central banks.

also, while bitcoin may not be subject to 'this kind of manipulation', it is subject to entirely new kinds of manipulation. mt. gox could be making up trades that bolster the price. without information derived from a true marketplace with transparent, agreed-upon terms, we don't really have any idea what's going on. when i sold a large amount of bitcoins for dollars recently, i still held open the possibility that mt. gox wouldn't let me withdraw my money. fortunately, they did. but you'd just have to trust them to. we just have to exercise blind faith to hope that it is a market that roughly resembles the other (transparent, or at least regulated) markets whose charts we follow.

This memory is very close, already been priced in  ;)

We saw this effect on these very forums during the last mania. Bears were called trolls and silenced.

The sentiment now is not like that. There is much greed, yes, but there is also much fear. Greed might be stronger, but not much so.

I'm "greedy" for sure. But not borrow-money-from-loan-shark-to-panic-buy-BTC greedy, no chance.

I don't mind healthy downward corrective movements here and there: they shake out the weak hands, disperse 'coins and thus are better for bitcoin longer term.

I'm not particularly fearful of a major price crash, providing the core of Bitcoin remains sound. A crash just means: (a) I missed a theoretical (with wonderful hindsight) opportunity to sell at the peak of the previous bubble to buy back in more cheaply and earn a profit; (b) a new opportunity to buy up cheap BTC, one I almost certainly will not miss if it recurs. However, because many others are thinking similarly, I have a strong feeling - and it is nothing more than that, of course - that any downturn will be nowhere near as severe as the -92% bear market of 2011, not even close. Minus 50% could well happen, for all I know, but anyway, a crash just means cheap BTC for the taking.

ha ;)

while OP is good, who knows where the price will go before the bubble pops. it could go to $2000 before it crashes

well the biggest bear I know said is going to be a bubble and he sold @15USD and did not buy a bitcoins since then

3 pages of people saying that Alonzo is wrong. This means that yes we are in a bubble.

Bitcoin is not a stock. It does not have an intrinsic value. It is a medium of exchange, like the dollar and the Euro. The dollar and Euro have no instrinsic value either.

More musings on mania, specifically, the aftermath.

The peak is characterized by a very sharp, quick selloff.  This is followed by an equally swift rebound that gets close to, but does not reach the prior peak.

The NASDAQ peaked at 5100 in March 2000.  Two weeks later, it was at 3400.  Keep in mind, this is a trillion+ dollar capitalization index.  That's a drop of 33% in two weeks!  (Keep in mind that a bear market in stocks is defined as a 20% drop.)  What a drop like this does is to introduce a small amount of doubt.  It "turns" a certain segment of believers into non-believers.  This is the smart money.  They begin to look for a chance to get out. 

Less than 3 months later, the NASDAQ was back up to 4300.  At this secondary, lower peak, the psychology has a particular flavor.  There is a certain fraction of people who will simply not go back in and buy.  As mentioned before, these are the smart money.  But the majority of previous believers still believe in the bull market.  They think to themselves, "Well, looks like we're off to the races again.  The prior peak was at 5100.  In another month, we'll be at new highs!"  Problem is, the market can't get to new highs because the smart money is gone.  That fraction needed to buy back in to get to the prior peak is no longer around to bid up the price.

The disappointment usually results in another batch of people who stop believing.  This is the smart-but-not-super-smart money.

Generally the market eventually settles to lower number at a lower volatility.    This is characterized by tremendous indecision.  Is the "New Economy" story still true?  Is the bull still on?  Usually the market decides the answer by going lower.  This is when the "middle batch" of market participants leave.

The last phase is the low volatility death-by-a-thousand cuts bear market.  The price drop in absolute number isn't that much, but it feels like a lot longer because it's drawn out over a much longer period of time.  It's absolutely demoralizing and winnows out nearly everyone who participated in the prior exponential rise.  Eventually we reach capitulation.  The NASDAQ bottomed at 1200 in late 2002.  This is when the smart money starts to nibble again. 

------------------------

Having said that, I'll make an assessment and some predictions.  I entered a market sell order when Mt Gox was at 220 but it didn't get filled till a hour and half later at 150.  So I'm totally out other than my Bitfloor debt.  This is only my opinion.  Diverging opinions make a market.  And anyone who thinks a forum post can affect a billion dollar market is naive.

Anyway, the conversation today feels a lot like that secondary peak.  I believe the very smart money has left.  Yet the majority is still optimistic, most expecting the prior trend to resume.

I think the price will converge to a low-mid 100s price over a few weeks.  Then we'll have 12-24 months of a slow burn, possibly down to a price of $25-$50.

Disclaimer: I'm probably wrong, and anyone who uses my thoughts to guide their trading deserves to lose all of their money.

One more thing:  I still think Bitcoin is awesome. I think it will eventually reach thousands of dollars in price.  I hope it changes the world and creates a better civilization.

I'm curious, what is your opinion on gold, and where do you see the "smart money" going next?  Gold to me seems to be in the "slow burn" phase, as you describe it.  Shall we all hop into equities and place our trust back in the central bankers and captains of industry?  Go for a ride on Bernanke's and Obama's magic carpet?

I do believe gold is in the late stages of a cyclical bear market (within a secular bull market).  I've put my long term money into physical gold at lower prices, and long term I'm very bullish.  I do think the late stages of this secular bull market in gold will look a lot like what we've just witnessed in Bitcoin.  

Sentiment is as low as it's ever been in gold by certain measures(1).  Anything can happen but I do believe we're much closer to the lows in gold than any high (which i think will eventually be 10,000-20,000).

I think stocks are a terrible place to be.  Despite what the media says, stocks are expensive by conservative measures.  They're also overbought.  This feels a lot like 2007 to me: it's nearly impossible to find a stock bear.

1. http://www.acting-man.com/?p=22540 (http://www.acting-man.com/?p=22540)

Interesting words.  What you've said very closely matches the 2011 crash.  Whether it'll continue going down now or not, I don't know... it's a bit difficult for me to say.  There's still lots of new services being created, lots of new people waiting to be verified and buy in, lots of venture capital flowing in to Bitcoin companies, etc.  I don't think we're even close to the level of the dot-com crash, simply because even still, hardly anyone knows about Bitcoin.  I think in the long term, Bitcoin will definitely go higher than $266.  It has to, to become more useful.  Will we see a months-long slump before we get there?  Maybe...

...did you even read this thread?

Also, most of the arguments in this thread about how this isn't a bubble can be summarized in two words: "Because Bitcoin". That phrase means just as much in most situations as "because the internet" does - nothing at all.

Well written post. Thanks!

Healthy skepticism is always important. Never invest more than you can afford to loose, especially in something as experimental as bitcoin.

That said - I for one am in long, and I will hold till the cows come home. I believe in the principal of bitcoin, and feel it's something humanity needs disparately, and in the end will see the current prices as cheap. However, my strategy since I bought in at $5 was to pay cash for a house or hold until I retire. Will I get my house? Or I will I get a retirement? That is the question in my mind.

Great post.

20 years ago, I invested money in the Toronto Stock Exchange 300 index - thinking it was a broad index, only to have Nortel Networks be 25% (or more?) of the index - and then that stock ended up losing 99.5% of its value.

The mania is here.

The bitcoin surge/bubble does have the key difference where there is positive feedback.  The surge/bubble increases news stories which actually increases the user base and the value of bitcoin.  This is very different from tech stocks where the news bubble didn't increase value.

This means we're likely to get an even bigger bubble, and that the higher the bubble goes the stronger its support level will be when the bubble/surge collapses.

Thanks for sharing your thoughts, Alonzo.  I see troubled waters ahead for the world's debt-based economies, so I'm not keen on investing in stocks either.  I do think we may temporarily see more upside to equities as inflation kicks in.  I may pick up more physical gold in the next few months if the price bottoms out.  As for Bitcoin, I've always viewed it more as a tool than an investment, so I'm not too worried about downside risk.  It will be interesting to see how Bitcoin, Ripple and Open Transactions work together (or independently) to rewire the world's financial infrastructure.  These are exciting and unpredictable times in which we live.

I'm broadly in agreement with that, I think we are seeing a repeat of July 2011 bubble and crash, ware we saw a loss of about half the peak price in the immediate aftermath, followed by a gradual decline to about 1/10th the peak over the next 5 months.  While that sounds terrible it was really only a rollback to what the price had been 1 month before the peak.  The same rollback today would but the value at 50 dollars.

Oh no it dropped to over 105 from 266, after rising 1000%, and it bounced well......its all a storm in a teacup that will look like a blip on a curve in a years time

I advise you to read the OP another say 10 times. Let it sink in.

Yeah, big diff is no Helicopter Ben Printing billions a day to bail out the companies.

he is doing that for me!

You repeat the same narrative I've seen over and over on this forum.

Cuban made a huge amount of money when he sold Broadcast.com to Yahoo and then timed the selling of his Yahoo stock very well, before the price crash.  Broadcast.com was not the first company he grew then sold though.  You can find on YouTube an interview of Cuban on Stern's show in Feb, and in that interview he goes into that a bit.  It's a good listen.

http://www.youtube.com/watch?v=Wl230QL_tSc (http://www.youtube.com/watch?v=Wl230QL_tSc)

Great post Alonzo, never mind the trolls and thanks for taking the time to share.
I was inside one of those companies, there was internal inflation as well. As most companies could no longer afford the astronomical salaries of new employees, they started promising stock options.
As you know, these are worth nothing as long as there is no stock, but people invested their time in those internal bubbles.

Comparing Bitcoin with the Internet and it's 'boom, crash and rise' is senseless, as at no point in time could you buy or invest in the Internet. Bitcoin's largest problem is the volatility, meaning it won't ever be accepted as a safe currency by merchants, as the risk is higher than their profit margins. We will need a very long period of stability and then fluctuations that are similar to teh current USD/EUR fluctuations. Anything more and it will fail.

One reason many people decide to buy (those people that should make you alert), is because now even in Europe the interest on savings accounts is lower than the inflation, so saving will cost you value at the moment. Then again, not as much as when buying something at $250 and selling it at $120..

no rebuttal, merely recital