I feel like it is a lot less like Tulip mania and a lot more like the dotcom boom/crash. I say that in the sense that there is significant utility in some cryptocurrency concepts, but not all of them...however there is widespread overheating due to speculation.

That is also to imply that some may emerge after a crash in the same way that Amazon, Google, eBay/Paypal, etc., emerged and thrived after the crash.

I do not deny the utility of crypocurrencies there will be winners out of this. But current breed of investors will trigger another bout of golbal meltdown.

Even Amazon lost its value during the crash so chances are that most investors sold out everything in panic. Only those who had nerves of iron actually came out alive.

I don't think there's enough money in cryptocurrencies to trigger a global meltdown. It will no doubt have an effect of the economy, but it's still fringe enough that a crash in the near future would be mostly harmless.

At the moment it's not but of this mania continued for some more time it will snowball as more and more folks get in just because they don't want to miss out.

I hope you are right and crash comes early on.

I'm actually worried that one of the main things in favour of cryptocurrencies is that they can act as an effective currency for illegal activities, i.e. they'll stay profitable for as long as regulations struggle to keep up with them.

I believe that cryptocurrencies only reached a critical mass to be relevant att all because of the value it delivers to criminals.

All that is ever discussed about cryptocurrencies at HN is marginal in comparison.

I think enthusiasts and speculators are actually a significant driver of the high prices. Criminals would much rather have a stable, quick Bitcoin than what we're seeing right now.

I am starting to worry that this bubble is going to grow until it threatens the world economy.

See this prescient article, written in 2013: http://blog.gardeviance.org/2013/11/a-spoiler-for-future-bit...

POW can't work at these scales. At $250k/btc mining would burn something close to the equivalent of New Zealand's GDP. As this would be purely electrical energy, energy use alone would be equivalent to that of Spain or similarly sized country.

An extremely small fraction of the inflated value of these coins is actually part of - interacting with - the global economy. Most of it is not and will never be liquid.

Most of it has been and is locked up, not touching other aspects of the global economy, and most of the actual bubble value will vaporize without ever touching any part of the 'real' global economy.

It's the specific reason there is nothing to fear about the inevitable implosion of this crypto-coin bubble. Not to mention, after it implodes, the real money will be made as throughout history (whether we're talking the auto bubble or the internet bubble or the oil prospecting bubble).

The dotcom bubble implosion wiped out trillions in moderately liquid value (the US stock market as one example being radically more liquid than the coin market overall), a sum that makes the crypo-coin bubble look hilariously trivial (even if you inflate it up to $500 billion), the global economy kept trucking regardless; US GDP has expanded by ~80% since the year 2000.

Sun Microsystems during the peak of the dotcom bubble, all by itself, was overvalued (peak market cap near $200 billion, probably worth more rationally $60-$80b tops) by more than 2x the total sum of all bitcoins.

>An extremely small fraction of the inflated value of these coins is actually part of - interacting with - the global economy. Most of it is not and will never be liquid.

I am not sure how you arrived at this conclusion? As more money will move into these currencies, won't it create an impact when eventual crash arrives.

> The dotcom bubble implosion wiped out trillions in moderately liquid value (the US stock market as one example being radically more liquid than the coin market overall), a sum that makes the crypo-coin bubble look hilariously trivial (even if you inflate it up to $500 billion), the global economy kept trucking regardless; US GDP has expanded by ~80% since the year 2000.

Don't you think mania has just started? It took a few years for dotcom bubble to reach its bursting stage.

Money doesn't "move into these currencies". Someone has USD, someone has BTC. They swap. That's it.

Or maybe you mean that too much productive capital is being wasted mining these coins? If so, maybe you're right. I'm not sure that has much to do with a crash that would affect the global economy though.

You're not saying anything that couldn't be said about houses in the US Midwest.

> You're not saying anything that couldn't be said about houses in the US Midwest.

So?

The reason it was problematic for people to pour money into housing was that loans (often loans of around 100%) were secured on these assets. No one is currently securing loans on Bitcoin holdings. If they start to, that will be a problem, but I don't see banks ever securing loans on something so volatile.

Serious question: how much money is moving into these currencies already?

Bitcoin market cap was $9.4B a year ago, now it is at $58.3B. Average daily trade volume is ~$1B over the last few months. I guess trade volume just reported in USD, but includes all bitcoin transactions.

Is there a way to estimate how much money from 'global economy' actually moved into bitcoin and other currencies?

Edit: typo

> Most of it has been and is locked up, not touching other aspects of the global economy, and most of the actual bubble value will vaporize without ever touching any part of the 'real' global economy.

I think the question is how much actual currency will be borrowed against cryptocoin valuations, and how much and over how many generations will people manage to leverage that credit, before that value vaporizes. Derivatives will always be the problem. With the actual economy not producing returns (over 1 or 2%), cryptocurrency may distribute the paper value that investors demand throughout the economy without 99% of people and funds being able to find a mention of any cryptocurrency in their own portfolios.

What is the state of cryptocoin derivatives anyway? Are they being synthetically collateralized? Are they part of any major consumer fund mix?

Depends on whether assets or debt will be leveraged for speculation and whether futures contracts will be used as some kind of meta-currency.

Then you have contagions because it will erode trust in other sectors. Economies kinda freeze up without trust or reliable value propositions.

Speculation sure but I don't see how leverage can get too high with a hard limit to the number of bitcoins floating around. Not like option contracts for example where you create as many as you want out of thin air.

Well the leverage would be in option contracts on Bitcoin. These are already available on some exchanges.

I'm not sure a crash will look as expected. People currently holding the crypto-assets aren't in any rush to liquidate to pennies on the dollars they spent, and there can and has been a long delay before the rallying drums get new money and excitement pumped into it to make the "$100" cost something someone is willing to pay. They buy, the value goes up some, perhaps they sell some to realize they can make a return - it wets their appetite, and they pump more money into it - whether $1000 or $100mm. It's very dangerous for society because it could actually work