Today I’d like to talk about what I think is the first real evidence of a bubble forming in the global markets. We’ve been hearing this since at least 2014. And while I too convinced myself that 2016 was it, which result in a failed attempt to time the market, I believe the first real signs of a bubble have just appeared. But that too doesn’t mean it will burst right away or that the markets will instantly drop.
So what is this sign?
The new market highs?
The ridiculously priced bond market?
In both cases no.
Those who lived through the 1999 tech bubble remember that everyone and their mother was giving stock tips. That’s a sign of a toppish market that people are waiting to see. In my opinion, that’s not going to happen. Though we do see a significant increase in investors who think they have become experts.
The real sign is cryptocurrency. There are over 1200 cryptocurrencies with a total market cap of around $200 billion according to coinmarketcap.com. Bitcoin has gone from under $1000 to over $7000 just this year. There are cryptocurrency boiler rooms that are being shut down by the police according to the Telegraph (click here). A Bitcoin futures contract will be launched by the CME in Q4 (click here). Cryptocurrency is being talk about absolutely everywhere. Go ahead and ask your friends. I’d bet that at least one of them owns some coins. This is not restricted to the rich and famous like Mark Cuban or Ashton Kutcher (click here). An acquaintance of mine who can’t afford to fix his car and is behind on bank payments is the proud owner of EUR 1,000 worth of some cryptocurrency.
Now you may say “What does that have to do with the next crash? The cryptocurrencies will crash, people invested will get burnt and the market will continue to rise.” But is it all so simple? I admit I can’t connect all the dots, but what I see is a mania that has possibly consumed a great many people and has implications far wider than we can imagine.
I have an app on my phone called StockTwits. When I updated the app what do you think was the full title? “StockTwits and Crypto Chat” I have no idea when “Crypto” came into the picture but it wasn’t always there before. Actually, in the iTunes store you see it while in the Google Play store you don’t. The Google Play store doesn’t say anything about crypto so I suspect the updated name and feature “price graphs 100+ cryptocurrencies” is a relatively new thing. Cryptocurrency is everywhere. It’s been mentioned at 3 conferences I’ve been too. We even had a topic discussion called “Is there value in the crypto space?” at the Cyprus Value Investor Conference. My conclusion is that while blockchain is huge, cryptocurrencies are not. Blockchain technology will revolutionize the financial sector, but cryptocurrencies will drive many “investors” to poverty. The Bitcoin mania is a sign that this euphoria is coming to an end.
