Ponzi Coin: A Sign of the Times?

Everyday you hear that Bitcoin is rocketing to the moon.  But did you know that there are over 1,300 Crypto currencies?  Here is a list of all available Crypto Currencies you can buy.  This compares to 180 currencies recognized as legal tender by the United Nations worldwide.  So in just a very short time we now have 7x more crypto currencies than real ones.  At least one brave person has named what many of these currencies are – PonziCoin (it was #923 as of the writing of this update, but could be different when you click the link above).  It is fun to look at other names as well – Unrealcoin, Womencoin, Ganjacoin, Dopecoin Guncoin, Russiacoin, Insanecoin, Macron and Trumpcoin to name a few.  Seriously?   You can’t make this stuff up.

So what is the true value of these crypto currencies?  Most are just made up currencies with no assets backing them.  There is no intrinsic value in crypto currencies much like tulip bulbs had no value during the Dutch tulip mania in the mid 1600s.  What is even worse is that hackers can steal these coins from your computer.  Sophisticated exchanges are not safe even with their high end computer security measures.  One exchange had $80 million worth of Bitcoins stolen the other day.  So even if you have great computer security, hackers can find a way to steal your coins.  The Bonnie and Clyde of today is sitting behind a computer screen, not robbing banks with guns.

There are many parallels today to the 1999-2000 stock market bubble: historic lows on cash held in retail brokerage accounts, overvaluation as measured by CAPE ratio, easy liquidity, investors having 2^nd highest percentage in stocks in 65 years (only higher for a brief time in 2000).  Now we have one more: people putting money in investments that are worthless.  Remember all those .COM companies (like Etoys) going to market and investors lapping them up even though these companies had no real assets?   So here we are 17 years later and investors have forgotten that lesson with crypto currencies.  Yes, the market is never the same, but it rhymes.

What should investors be doing with crypto currencies?

If you are one of the fortunate few that has made money on crypto currencies, congratulations.  Sell now.  For those of you contemplating buying one of these “coins”, we say run, not walk away.  Another suggestion would be to go to Vegas instead.  With that money you can have a great vacation, eat well, maybe see a show, gamble (with a higher chance of winning than crypto currencies) and get free drinks!  Even if you lose all the money that you were going to use to buy 1 Bitcoin, you will probably have some great memories and pictures to remind you of your vacation.  For those more creative, start your own crypto currency.  Come up with a flashy name and sell your computer monopoly money for real dollars.  That is how you make money in crypto currencies.