What if cryptocurrencies are not a bubble?

In Italian language we have a funny term: “Gufare”. It literally means “being an owl” or rather “owling”. We use this word when we want to refer to someone whom day-and-night wishes someone else to fail.
So for example in football, when Juventus keeps winning, some supporters of AC Milan and Inter Milan would “gufare” against Juventus. The term was actually conceived to address this specific sport behaviour, but soon became popular in other aspects of life. So when an entrepreneur is suddenly successful, some begin to “gufare” against him or her. It is a sort of “act of envy”. In Middle East, to my knowledge, this is referred to as “the eye”.
In “crypto-world” this has also taken place. The website www.99bitcoins.com for example collects and publishes all the instance when Bitcoin has been “owled” against.
In some cases it was defined as “finished”. There are hundreds of such Bitcoin obituaries published on the website and it is really interesting to browse down the list, back in time, and read some of the silly ones.
For instance, the financial legend Bloomberg, in August 2013, published an article called “The SEC shows why Bitcoin is doomed”. At that point the cryptocurrency did not reach $100 yet. Even funnier was the August 2011 article published by Gizmodo Australia titled “The Bitcoin Is Dying. Whatever.”
Back then the price was merely $10. With hindsight, even sillier was the article titled “Why Bitcoin can’t be a currency”, published by The Underground Economist when Bitcoin’s price was just 23 cents.
It is obviously easier to look back than looking ahead, so perhaps all of these prophecies could eventually become real one day. But in the meantime Bitcoin scored big.
That is eventually the proof of how useless is “gufare”. When AC Milan and Inter Milan did it against Juventus, the latter kept scoring and winning, while the formers kept losing… and kept “Gufare” of course. So even if eventually Bitcoin will crash and burn, it undoubtedly gave this world an unprecedented number of new millionaires.
So, at the cost of singing out of the choir, I would — for a moment — imagine that cryptos are not a bubble. Why so?
Well, so far the “owls” kept comparing Bitcoin (and other cryptocurrencies) to the bubble in the year 2000. Back then however, when the stock market crashed and burned, those holding stocks could only “sell back” in USD.
So for those who saw their profit growing in numbers, they were actually holding onto a piece of paper that at some point nobody was willing to buy at a higher price. With cryptos it is different. In fact, the most important question is not “When will you cash out”, but “How are you going to spend it”.
The core difference between the stock market bubble in 2000 and cryptos, is that nobody back then would have sold a house or paid rent with some over inflated stocks, while already now, properties are bought and rented in cryptos. So although we cannot (yet) buy coffee in cryptos at the coffee shop behind the corner, we can still find someone interested in taking our cryptos in exchange for some goods or services.
Just last week a friend told me that he signed a new tenancy agreement to be paid in Ethereum. This is already happening.
The other aspect that might not portray cryptos as a bubble could be the adoption desire. Currently there are very few individuals in this world who own cryptocurrencies.
Do not get me wrong… some of them owns very large quantities, but the number of people that actually got to buy and hold cryptos are relatively few. Perhaps less than 0.1 per cent of the world’s population. I imagine that in some countries Bitcoin could be the most desired gift for Christmas 2018 as much as iPad used to be. Bitcoin (and other cryptos) are desirable digital objects that the-man-in-the-street wants and wish to have.
Given the percentage of market being covered so far, there is still a long way to go. Maybe it will not be Bitcoin, maybe there will be the emergence of other cryptos (like the recent growth of Ripple), but maybe they are here to stay, and not to crash and burn.
Lastly, let us not forget that from the bubbles we often inherit good “stuff”. Facebook, Google and Twitter (to mention just a handful) are a product of the post-bubble.
Amazon as well as Alibaba (or rather Jack Ma) went through the bubble and grew to unimaginable size. What about the subprime mortgage bubble then? Well, that is the bubble that gave birth to Bitcoin and cryptocurrencies in general. So maybe, just maybe, cryptocurrencies are not a bubble, but maybe they are the awesome result of what a bubble leaves behind after bursting, whether the “owls” like it or not.

Stefano Virgilli
stefano@virgilli.com