The Bitcoin Bubble

Eugene Fama once said, “You only see bubbles in the rear view mirror.”

If you knew it was a bubble, you could take advantage of it in some way and the bubble would never happen.  The only way to “take advantage” of the run up in Bitcoin is not to buy it or sell it.

It certainly feels frothy to me.  All these ICO’s are going off and people are buying.  We are seeing some very large percentage gains in different crypto that are far outside any normal ROA distribution.

That doesn’t mean it is frothy.

One thing about startup investments is they all look crazy at the outset.  I totally love this Venn Diagram.  I first saw it from a16z’s Chris Dixon and I used it in a presentation which is why you see our logo on there.  (I credited him in the presentation, not plagerizing)

It’s way to early to even know which crypto is going to pan out and which one we will pan.

Listening to Fama talk about the internet bubble in 2001 is informative. If I may paraphrase him; He said markets are efficient. In the internet bubble, all of the information we had was priced into stocks. As soon as we got more information, it got priced in. At the time, how did we know what the real revenue would be on the companies that were trading at outlandish PE’s and had no revenue. The internet was so new, no one really knew anything about it.

I think the same can be said for crypto.