FOMO kicks in. New investors throw theirs hat into the ring. New companies and projects are launched en masse. It starts to feel like a wondrous moment. That's when share prices come crashing down and many investors get caught out and lose a significant amount of money. It sounds crazy, but as the story goes, tulips were introduced to the Dutch in the lates, soon becoming a highly sought-after commodity.
The price of tulip bulbs shot up.
Price speculation was driven by massive demand, low supply and greed. Then tulips started getting a disease that made them look like flames and they became even more valuable.
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People were buying tulip bulbs in a frenzy. But at some point people started buying tulips for the purpose of selling for profit, which ultimately led to more selling and buying, and, alas, the price crashed, bursting the bubble that was Tulip Mania.
No flowers this time, but you've probably heard of the Dot-Com bubble. In the lates with the introduction of the Internet, new companies were popping up left and right, trying to get in on this new tech. The Internet was the next big thing and everyone wanted a piece of it. This led to huge speculation by Internet startups. Companies could form, join the dot com revolution and achieve ludicrous valuations seemingly overnight.
Share prices skyrocketed, but it couldn't last and eventually the bubble burst.
Opinion: What Do You Think About the Future of Bitcoin? | ecommerceIQ
Few companies survived. But it paved the way for a more sensible Internet landscape. Crypto skeptics have historically quick to label Bitcoin as a bubble, especially throughout as prices rose and rose, with Bitcoin reaching a peak of 20, USD. On the other hand, crypto enthusiasts are certain that this asset class has a fruitful future ahead. But equivalencies can indeed be drawn between the Dot-Com Bubble and the rise of cryptocurrency. Price movement driven by speculation based on new technology is apparent in both cases.
Speculation over-saturated the market.
Experience: I made $1m on bitcoin – and lost it again
Cryptocurrency followed a strikingly similar trajectory in , when ICOs were everywhere, raising millions of dollars, with plenty of investors lining up to fund projects that were often little more than a whitepaper. As you can see, the end of was not the first time that the price of Bitcoin has shot out of nowhere and broken incredible new highs before a heavy correction.
We've seen this all before. Bitcoin isn't dead.
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Bitcoin isn't a bubble that's popped for good. We are just getting started. Bitcoin is a relatively new asset. Bitcoin has the potential to change payments as we know it. But what we do know is that Bitcoin is a nascent technology and that future application is not really quantifiable, so over speculation and bubbles are to be expected along the way.
Bubbles of the past
Some people buy Bitcoin because they want to store their money somewhere other than a bank. Some buy Bitcoin as an investment, believing that its price a few months or years from now will be substantially higher than it is today. And some people purchase Bitcoin as a means of investing in companies that raise money through an ICO, since equity in those companies cannot be purchased with traditional currency. You can only purchase tokens with Bitcoin or Ether, which is Ethereum's cryptocurrency.
Ethereum is another cryptocurrency, and one many people see as potentially overtaking Bitcoin as the dominant coin in the market. In any economy, currency is relative. Since Bitcoin has been the leading coin since the beginning, the price of every other "altcoin" and there are a lot of them is measured against Bitcoin.
Take Litecoin, for example. So, while it has its own value, it is by no means a market leader. What makes Ethereum different is its technology, not the fact that it's yet another cryptocurrency. Ethereum's coin value is referred to as "Ether," and just like Bitcoin is bought and sold, and used by investors to buy into ICO opportunities. The difference between Ethereum and Bitcoin is the fact that Bitcoin is nothing more than a currency, whereas Ethereum is a ledger technology that companies are using to build new programs. Both Bitcoin and Ethereum operate on what is called "blockchain" technology, however Ethereum's is far more robust.
If Bitcoin was version 1. Furthermore, there is heavy support behind Ethereum's technology in what is called The Enterprise Ethereum Alliance.
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- Experience: I made $1m on bitcoin – and lost it again | Bitcoin | The Guardian.
This is a super-group of Fortune companies that have all agreed to work together to learn and build upon Ethereum's blockchain technology--otherwise referred to as "smart contract" technology. In this case, "smart contracts" mean that demanding business applications can automate extremely complex applications.
What has so many people--including me--excited about Ethereum's technology is its potential to impact IoT projects and processes. It's by no means a perfect technology yet, but it has absolutely opened the door for all sorts of unique innovations. For example, my firm, Chronicled, recently worked with a 3D-printing company, Origin, to develop a 'smart tag' for sneakers and luxury goods that could guarantee their authenticity. This was done leveraging Ethereum's blockchain technology. All in all, and if you're as curious and excited about this space as I am, the major difference between Bitcoin and Ethereum is their separation of roles--and the fact that they are aiming at parallel but different goals.
This article on the topic summed it up perfectly , by citing that early adopters are beginning to see the separation as such: "Where Bitcoin is disrupting currency, Ethereum is disrupting equity.