A week before Christmas, this headline about a random cryptocurrency no one has ever heard of was read more than most best sellers: Asians 'Going Mad' For Ripple Coin. At the time, Ripple (XRP) was worth around a dollar. Today it is worth $2.45.
This will be the year that more unknown cryptocurrencies double in value. How many will quadruple in value is anybody's guess.
Sure, many of these new coins will disappear from the market. At their heart, the cryptocurrency craze is like the startup craze on steroids. Newly minted companies are going around the venture capital world, issuing their own digital currency, and having almost no problem at all finding willing investors. Got snake oil? No problem! Someone in Asia will take two bottles worth.
While setting up an initial coin offering is not cheap and needs upfront angel investing to foot the bill, the ICO market has turned what was once a half dozen cryptocurrencies led by Bitcoin into a $650 billion market overrun by over a thousand cryptocurrencies. These currencies are tied to new, unknown companies selling products and services no one has ever heard of, understands, and may have no real use for.
As an investment vehicle, the cryptocoin is the market's version of a poker chip. If you thought junk bond lords in the '80s were nuts...
Nuts? Oh, really?
The cryptocurrency bubble, if you will, has thousands of nutty investors laughing all the way to the bank. Literally.
If Ripple coin has doubled in value, what are the odds of some other coins doubling too? Very high, in fact. Those odds are keeping investors looking down-market at lower-price coins. There is just too much upside, and no one has yet been willing to come forward to the press to say just how much money they've lost. The world is full of stories of people who lost all their money in their new business or saw half their life savings evaporate due to a crashing stock market or a financial swindle. But we have yet to meet the person who lost their shirt on a bitcoin bet.
And if their shirt is the only thing they are losing, then that's not a cause for concern yet. Until investors come forth with big losses, the trend is your friend in 2018.
Tuesday marked the first trading day of the new year for American cryptocoin investors. Only three of the top 20 coins started off in the red. Little known coins issued by startups like Tron and China's NEO are up over 30% as of late Tuesday morning.
Tron is worth a mere six cents. China blockchain platform and Ethereum rival NEO sells for around $100 a coin.
In 2012, one bitcoin was about $15. It's worth over $15,000 now. If one NEO is worth 3,000% more in 2021, like bitcoin since 2012, then it's worth the gamble, most investors believe. A $100 loss isn't putting anyone in the poorhouse.
Ethereum, an early entrant to the blockchain/cryptocurrency buildout, was developed by Russian-born tech genius Vitalik Buterin. He's now a millionaire many times over.
Another Russia, Pavlov Durov, now residing in Dubai, is rumored to issue coins this year for Telegram, the messaging service most used in the crypto world. Durov did not return requests for comment at this time.
All someone like Durov has to do is look around him and see the money that is being made from nothing.
Nearly $3 billion worth of Ethereum's ether coin was traded between the exchanges in the past 24 hours. The total market capitalization hit $84.12 billion, meaning this Russian-developed blockchain is now worth around $15 billion more than Brazil's state-controlled oil company, Petrobras, a company with over 60 years experience in the oil and gas markets, and one that actually has hard assets worth real money.
That's no longer a viable comparison. Bitcoin and ripple are worth even more than Petrobras. Bitcoin's market cap is the equivalent of Chevron's. Ripple's market cap is just shy of Goldman Sachs'.
Alexey Ivanov, fund manager at Polynom Crypto Capital in Moscow, thinks unknown Ethereum competitor Cardano Cryptocurrency will double this year. It's up over 500% since its ICO in late 2017. One coin goes for just $0.77.
"Once Cardano is added to a regulated platform, it can double," he says. Volume is next to nothing on that coin because the blockchain infrastructure company is still working on so-called "proof of stake" coding to verify digital transactions.
Ethereum is currently working out the kinks in its own system, to help remove bottlenecks. Ivanov thinks that's why the coin is up 17% on Tuesday.
David Herne, the American hedge fund manager behind the Specialized Research and Investment Group in Moscow, likes Waves, the Russian developed blockchain startup working with the Moscow Stock Exchange on a pilot program that would allow for trading in cryptos by qualified investors. That coin goes for $13.21 today and already has a billion-dollar market cap.
Buying cryptocurrencies is not liking picking a stock on E-Trade. E-Trade is like the intermediary between an investor and the New York Stock Exchange. There is no such comparable entity in the crypto world. Instead, there are many exchanges, some bigger and better than others. Not all carry the same digital currencies, and the proof of identification process can day days if not a week to complete. Exchanges like Kraken and Bitstamp, which allow users to buy ripple coin, are spotty. (They were down both times I tried using them last week.)
"Call it a bubble if you like, but can you really afford to stay out of crytocurrencies?" writes Naeem Aslam, chief market strategist for ThinkMarkets in London. He posted his views here on Forbes.com.
Cryptomania was unquestionably the major talking point of 2017. The question is: can you make money while still thinking there is a bubble? Giving a straight answer: if you can afford to lose an amount which won’t make any meaningful difference in your life, then by all means, dabble. An average American aged between 20-64 earns approximately $27-50K a year. In the grand scheme of things, $100 invested in cryptocurrency has a minuscule probability to impact anyone dramatically. The rewards are undoubtedly there. "
In 2018, investors are going to spend time discovering newer companies and their coins, especially those that do not cost the price of a new car (think Kia Soul, for instance).
As a result of this trend, bitcoin's dominance of the cryptocurrency market has fallen to its lowest level in five years. As of now, bitcoin’s market cap is $233.6 billion, accounting for 36% of the total value of all cryptocurrencies. In January 2017, bitcoin accounted for 80% of all trading in crypto.
