Bitcoin — How a combination of Turkey and FOMO made the market go NUTS
From the perspective of a business student at Northeastern University’s D’Amore-McKim School of Business.
Bitcoins! Bitcoins! Come get your Bitcoins!
Judging by the completely insane jump that the cryptocurrency market made following the Thanksgiving Day holiday, it seems like everyone and their grandmother is jumping onboard the crypto-train. The market jumped nearly 40% breaking all sorts of records. Bitcoin hit record highs of over $11k, Ethereum peaked at $509, and Litecoin made its way all the way to $102. To put things into perspective — Ethereum was $280 on 11/3.
While there are literally hundreds of different coins, I am talking about these three specifically because they are the ones being traded on Coinbase, which is the most popular crypto-wallet on the market. A crypto-wallet is where you can buy, sell, and store the coins). One thing that made Coinbase dominate the market is that it is SUPER simple to use — so, quite literally, even your grandma can buy some bitcoin within a few minutes of downloading the app (ok — in reality she will have to wait for a week for them to approve her bank account, but after that she will be able to do the transactions instantly).
Overall this was a great weekend if you already owned some cryptocurrency, but it probably wasn’t the best time to buy (I would say definitely but one can never be 100% sure with these things). While it may be tempting to go buy some crypto when everyone is talking about the wild rate that Bitcoin is growing at, you are putting yourself at risk by doing so. Anything that can increase by more than 10% in a day, can also drop the same way. While it is good to follow the market and see where the coins stand, it is best to wait for dips, when people start panicking and selling off, to buy in.
Below is an example of such a panic following a few days of astronomical growth.
So what happened this weekend?
An interesting theory I heard about the root cause of this HUGE increase post Thanksgiving was…. dinner conversations.
Yep.
It was YOU telling your Uncle Jimmy about the killing you've made over the last several months with the .3 Bitcoins in your Coinbase account that caused the market to spike.
How?
Uncle Jimmy went home, read a little about Bitcoin, and purchased some coins. Now think about how many Thanksgiving day dinners happened in the U.S last Thursday — quite a few to say the least…and it looks like Uncle Jimmy wasn't alone. There were a bunch of Uncle Jimmys that went home and purchased some crypto assets to not miss out on the next big thing. After all, a 1200% rise in the last year is just too good to pass up. Well, us millennials call this FOMO — or Fear Of Missing Out for all those that don’t know.
While FOMO is generally used to explain why you went to a party that you actually didn’t really want to go to ( Don’t lie — we all know you were afraid of missing out on all the juicy details…), at a large scale it can also move entire markets. By the looks of it, that is exactly what happened here. Just like in the late 90’s where people were investing in all the emerging .COM companies, cryptocurrency is a very new topic for most people and other than the players that have been in the game for years, most of whom are very high level programers, very few people actually understand what it is.
So, how did I find out about Bitcoin?
Like a lot of people my age I first heard about Bitcoin back in the day of The Silk Road. The Silk Road, for those of you that don’t know, was a marketplace for literally anything. You could buy drugs, guns, fake id’s, hire hitmen, and a whole array of other wild things. It was really popular among college kids as a means to get cheap pot. I never used it personally, as ordering illegal contraband online seemed (and still seems) like a bad idea to me regardless if someone can track the transaction, but know many people that did.
Why am I bringing up The Silk Road in an article about Bitcoin?
Because it adds some context.
Bitcoin was the currency that was used on the The Silk Road. This way people could buy something and, unlike a normal purchase where you can see that person A gave person B money, the transactions here were completely untraceable. So as long as you don’t get caught during the delivery process (shipping drugs and weapons is, after all, a really bad idea), no one will know that you purchased them. To put Bitcoins astronomical growth in perspective, when I first found out about Bitcoin in 2012, one coin was worth around $100. Today, as I write this, one coin is worth $9,765 — a whole lot less than the $11,290 it was worth a mere 24 hours ago but still an absurd rate of growth compared to what it used to be.
Still having a hard time understanding why these coins are they actually worth any money?
Stay tuned to my next piece which will explain exactly that! (The short answer is — because of you)
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