Bubble or no, cryptocurrencies aren’t going away any time soon

Cryptocurrencies are back on the rise and they’re here to stay. So it’s vital you familiarise yourself with them. Dominic Frisby explains why, and how to do it.


It's vital that you familiarise yourself with cryptocurrencies
(Image credit: Artur Widak/NurPhoto)

Bitcoin looks like it's off to the races again.

From the mid-$6,000s less than a fortnight ago, it's now in the mid-$9,000s as I write.

Has the move got legs or is it a false dawn? Time to jump on board if you haven't already?

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Today we consider all.

The huge communication problem in crypto

The sober investor might consider a 45% move in a couple of weeks a little racy for his portfolio. Well, how about 60% in one day?

Bitcoin is one of the steady ships in the volatile world of cryptocurrencies. It's for greenhorns and old-timers. Get with the game, Grandad! 10% swings on a daily basis aren't enough for this new breed of financial trader. They want that on a five-minute chart.

I was scanning through the lesser known coins yesterday, trying to see if this current move is sector-wide (and it is by the way), when I stumbled across Mixin.

What's Mixin? I'd never even heard of it. What does it do? A quick visit to its website explains all. Not!

"A TEE powered BFT-DAG network", it says, "that connects all existing blockchains with unlimited throughput." Heaven knows what that means. (And a few techies as well, probably.) I've no idea.

You can't argue with the stats though. It was up 60% yesterday and now has a market cap of $412,084,605. Over $4.5m of coins traded over the last 24 hours.

I did a quick search on Twitter to see if I could find out more. Mixin has 1,609 followers. I've got more followers than Mixin! I'm not doing badly in my life, I'd say (though there's plenty of room for improvement) but I don't have a market cap of over $400m.

Mixin is, as far as I can make out, a technology for distributed cross-chain transactions: that is, I presume, to transact from one blockchain to another. It claims to be faster than any existing blockchain network (that's quite something if true). Its main use is end-to-end encrypted messaging, and mobile and PIN identity.

I think I've got that right, but I really couldn't tell you for sure. Gosh this space is bad at communication! From the word go it's been populated by obsessive coders, who are incapable of communicating basic stuff to lay people.

What's bitcoin? It's an alternative system of money for the internet. That's all you need to say and people understand you. Yet for years bitcoin has been plagued by people saying "I don't understand it". Somebody then explains how it works, how it solves the "Byzantine general's problem" and some such and everyone's even more baffled.

It's a system of money for the internet. That is all you need to know.

What's Mixin? It's a new messaging system (I think). That's the first thing that should be on the website. Then ordinary people get it. But if your strapline the first thing people read about you is "A TEE powered BFT-DAG network that connects all existing blockchains with unlimited throughput", how on earth can that be described as communication?

This is a sector-wide affliction.

Anyway, Mixin has recently done a token sale, it seems. There were some issues with bugs. There was a fake account masquerading as Mixin on Twitter. And now it has a market cap of $400m-plus.

A bubble is a bull market in which you don't have a position

Whenever you read this kind of stuff, it's all too easy to scream "bubble".

"I don't understand it. It seems to have no real world utility. The price has gone up by an extraordinary amount. Therefore, it's a bubble."

Remember my first definition. A bubble is a bull market in which you don't have a position. It is human nature to dismiss and discount something in which you are not invested. It's a way of justifying your lack of exposure.

But at the same time that doesn't mean you should all go out and invest in something you don't understand. Warren Buffett famously avoided the dotcom collapse having followed his maxim never to invest in a business you cannot understand. But he also missed out on all the gains.

There is so much going on in the crypto space at the moment that it is more than a full-time job keeping up. The metaphorical technological western frontier is being expanded on a daily basis and there is a gold rush. You cannot hope to dance with all the alt-coins girls.

But at the same time, you want to dance with at least some of them.

So my advice remains the same as it has always been: buy a small amount of cryptocurrency £20 or something. Get a friend to do the same. Practise sending each other small amounts of money. Visit a site that accepts cryptocurrency. Buy something. Open an account with a cryptocurrency exchange. Trade small amounts of currency for another currency. In other words, play with the tech. Learn how it works. Familiarise yourself.

If you like it, if you think it's good, then invest. If you don't, walk away. But that way, at least you will have tried. You won't be a no-coiner ignorantly dismissing something you don't understand. But nor will you be blindly chasing some market merely because the price is rising.

You'll have reached your decision based on some research.

Maybe Mixin is really good; maybe it isn't. Somebody somewhere seems to think there is something to it, even if it is incapable of explaining what it does. That's why it was up 60% yesterday.

Maybe with WhatsApp, SnapChat, Signal, iMessage, Telegram and old school texts, we don't need any more messaging apps. Maybe Mixin is doing something none of these do. Who knows? Anyway, I've just downloaded the app onto my phone and I'm going to try it out.

Problem is nobody else I know has!

PS Thanks to everyone who came to the try-out of my Financial Gameshow on Monday. We had fun. My MoneyWeek colleague, Ben Judge, turned out to be the winner, prompting many in the audience to make accusations of an inside job.

I'll be back with another try-out in North London on 22 May. Come on down. And if you're up at the Edinburgh festival this August, tickets for the main run have just gone on sale. It'd be great to see you there.

Dominic Frisby

Dominic Frisby (“mercurially witty” – the Spectator) is the world’s only financial writer and comedian. He is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. He is the author of the books Bitcoin: the Future of Money? and Life After The State. He also co-wrote the documentary Four Horsemen, and presents the chat show, Stuff That Interests Me.

His show 2016 Let’s Talk About Tax was a huge hit at the Edinburgh Festival and Penguin Random House have since commissioned him to write a book on the subject – Daylight Robbery – the past, present and future of tax will be published later this year. His 2018 Edinburgh Festival show, Dominic Frisby's Financial Gameshow, won rave reviews. Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art.

You can follow him on Twitter @dominicfrisby