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As Crypto fad spreads, old lessons in Economics persist

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Is a Cryptocurrency Bubble Looming? Futurist Jason Hope talks about the marriage of tech and investment's future.

Tech futurist Jason Hope reminds us not to get too carried away with newer forms of digital currency

It’s been a big year for cryptocurrency. That could probably be viewed as an understatement, actually; any time the value of anything increases by 500 percent in a year, common terms seem to fall short of doing it justice.

Yet that’s been exactly the story for forms of digital currency like Bitcoin, and Ethereum. Just one unit of the former is worth seven grand this month, while Ethereum has consistently ranked second in the crypto world in market cap value. To make an attempt at framing Bitcoin’s meteoric rise in value this year, the currency made financial headlines back in March when it first surpassed the value of an ounce of gold at around $1200 per share. Today – a mere nine months later – it’s worth six times that much.

Crypto has spread to circles outside of the tech and finance fields, ones which in their own right have been buzzing about it for some time. These days, it’s attracting more unlikely investors. Money Mayweather, anyone? How about Paris Hilton? Perhaps Wu Tang Clan member Ghostface Killah’s new Crypto firm Cream Capital strikes one’s fancy…

You get the picture. Crypto is everywhere, and growing.

And I’ll offer this caveat before I get to the meat of the matter: I couldn’t be happier to be involved in tech. There’s arguably never been a more exciting time to be in the industry, and if you take a look at my blog you know my enthusiasm for these matters.

Still, as stewards of this new age, futurists – as we’re often billed – would be remiss if we weren’t to temper our excitement with a healthy dose of caution. I’m doing that today, and if you’ll bear with me I’m going to draw on some stuff dating all the way back to high school Economics class. Let me blow the dust off my textbook.

Ready?

There’s no such thing as a free lunch.

Just joking – NSTAFL has no application here. What does apply, though, is another basic tenet of economy and value: Scarcity. And scarcity is exactly what the crypto world is beginning to lack.

When a new product or service hits the market, it relies on demand and production capability to impact its value. If I have a really killer sort of coffee bean, for example, that’s great for me. No doubt people are going to like it and laud its quality. Who knows? Maybe Anthony Bourdain or someone of the sort will even risk capture by making a trip down to one of my plantations in Columbia and filming a TV spot about it.

Thing is, everyone loves coffee, and not everyone is willing to pay for imported stuff. Nor would most be willing to get a visa stamped for South America when a trip down the street to Starbucks would suffice (and likely be safer).

What I would lack here, apart from armed guards, is scarcity – there’s simply nothing obvious that sets my coffee apart from the other stuff. I could have the baddest-ass coffee beans in the land and nobody would care (or possibly even know) about them because the market is flooded with other, more available stuff.

Crypto world, take notice: it’s happening to your market too. Since summer alone more than 100 different forms of cryptocurrency have launched. It’s being talked about everywhere, and it’s very “in” to be involved. Just ask Jamie Foxx or Snoop Dogg…Lion…no, it’s back to Dogg now. My bad, Snoop.

Very cool. Yet it’s at this point your old Econ professor from sophomore year would caution: The scarcity is fast eroding. He’d not be wrong, either, for when scarcity becomes abundance, your possessions mean less – and less still, with respect to the breakneck growth of crypto.

Still, don’t fret right away – there’s certainly some avenues to play smart money. I’m not here to advise, but if it came down to picking an investment, believe I’d bet on a proven winner.

Bitcoin is one obvious choice. It’s been around nearly a decade, and runs off of the immutable Blockchain. I’d even be willing to take on some shares in Ethereum, given the stability it’s shown in an incredibly volatile market.

Not only does said market fluctuate – what’s happening here with Crypto growth has been likened by many to a bubble. Like a pocket of air being blown through one of those plastic soapy things beloved by toddlers (they’re pretty fun for adults also), the bubble’s increasing in size. And at some point – nearly every expert agrees – the damn thing’s got to pop.

The trick for you, if you’re thinking about investing, will be to pick a winner. Drop Paris or Ghostface a line if you will, but my money’s on more original beans.

 

About Jason Hope

Jason Hope is an Arizona-based tech, entrepreneur, futurist and philanthropist. A finance graduate of Arizona State University and MBA-holder from the school’s W.P. Carey School of Business, Hope’s recent work includes editorials on Internet of Things news, a new eBook, and insights into Tech industry developments. He resides in Scottsdale.

 

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