Is There a Cryptocurrency Bubble? Just Ask Doge

Now, here's the core problem preventing people from understanding the reality of the bubble: in almost all bubbles there is still a kernel of honest, real value inside the bubble. That's the impetus for the bubble, but it doesn't prevent the bubble from being a bubble. Housing values during the 2000s were based on a strong economy and increasing demand in some fast growing cities. In some places housing values merely plateaued during the financial crisis, in some they never stopped going up. But, of course, across America there was a vast drop in housing values, a huge increase in foreclosures, and a recession that spread across the entire planet. It was a bubble, the bubble popped, bad things happened.

A decade prior to that was the dot-com bubble. Many new internet businesses were growing like crazy, investment and stock valuations had gone off the deep end, leaving rationality behind. Businesses with no prospects for ever turning a profit were having money rained down on them from VCs and IPOs. Then eventually the bills started coming due, people became more skeptical of dubious business plans, venture capital dried up, stocks started getting dumped. Money stopped flowing so freely from investors into ridiculous startups and from there into the rest of the economy. The entire world economy was pushed into severe recession. But, of course, that doesn't mean there was nothing of value inside the dot-com bubble. Amazon cut its teeth in that era, and grew from a fledgling book store into a fulfillment powerhouse expanding into a variety of goods and services. Easily tens if not hundreds of billions of dollars in real honest to goodness value was built by internet companies during the dot-com boom, and many companies weathered the bust just fine, some even getting stronger. Google was born during the recession, in fact, in an era when basically the only way you made it with a dot-com company was to already be turning a profit or to have a very good and well executed idea.

Of course there is real, substantive valuable stuff happening with cryptocurrency. But is that the majority of what's happening? Or is most of the activity, most of the valuations and "market caps" driven by speculative investment? It's pretty clear that it is the latter and that cryptocurrencies are in a huge bubble. And just as with all bubbles, when it pops it's going to be painful. Maybe something of value will survive? But only then will we know for sure what the true, hard-nosed practical value of cryptocurrencies is.