As the news broke of bitcoin hitting the $10,000 milestone and the exchanges attracting thousands of new subscriptions by the minute, it’s useful to offer consolation and guidance to those who stand to lose out in the event of a crash. The consolation is a somewhat utopian interpretation, which suggests that even if you lose money as a result of plowing funds into bitcoin, your investment is likely to benefit the human race in some capacity. The note of guidance relates to the potential of making a profit as a result of a crash by diverting your attention to the firms that focus on the applications and technology used to create and sustain bitcoin.
These guidelines are also relevant to other endeavors and ventures that are causing investors to leak money from every orifice, including Uber, Tesla (NASDAQ:TSLA) and Snap Inc (NYSE:SNAP). If you were to put money into these projects now, it’s very unlikely that you would ever see a return, let alone break even, but there is a drop of comfort, for you can enjoy the satisfaction that you’ve made a positive difference to others. By investing your money, you have contributed to and fuelled developments, which could benefit entire markets moving forward.
John Evans, a columnist for Techcrunch, uses the example of Tesla to illustrate this point. Unless you’re an investor, the purpose of Tesla, a firm that manufactures electric cars, is not to make money. Instead, it is to empower and encourage others to create rival products, which will make a positive contribution to the planet in years to come and facilitate the creation of infrastructure that is able to support these newfangled models. Another example is the Channel Tunnel, which connects the UK to France. The structure itself represents a major disaster for those who invested financially, but few would argue against its functional value. The Olympic Games are another case in point. Few benefit financially, but communities can be transformed thanks to new facilities and infrastructure.
You may be reading this with a degree of a cynicism and seizing upon its socialist undertones, but the reality is that the mechanism at work is actually evidently powered by capitalism. The model fits with the processes described by the Stamford-based research collective, the Gartner Group. According to their theory, bitcoin is like any other innovation that demonstrates early promise. After the initial period of hype, it goes through phases described as “the peak of inflated expectations”, “the trough of disillusionment”, “the slope of enlightenment” and the “plateau of productivity.”
Although a period of hype can often be described as ridiculous, it serves a purpose for both the company involved and the wider public. If you take Uber as an example, the argument will become clearer. Uber, for many, was always an accident waiting to happen, but consider the impact it made on the industry as a whole. If Uber hadn’t appeared on the scene promising cheaper travel, its rivals wouldn’t have been forced to try and compete. Prices wouldn’t have fallen, and companies wouldn’t be using apps like they do today.
The smart thing to do if you’ve got an investor’s cap on is to look for the firms or fleets who stand to gain from Uber’s demise like Yandex NV (NASDAQ:YNDX), the company that profited from Uber’s downfall in Russia. Competition is not the only gift Uber has delivered. It has also contributed to the development of pioneering autonomous driving technology, so it’s worth taking a look at companies in this industry as a potentially profitable side bet.
Going back to Elon Musk’s venture, Tesla, it doesn’t really matter if the mogul manages to deliver on his promise of bringing the Model 3 to the mass market anymore. What does matter is that Tesla has already done its bit in encouraging other manufacturers to up their game. Look around, and you’ll notice that almost every manufacturer has an eco-friendly model on the market. Even if Tesla doesn’t come up trumps, it’s likely that some of its competitors will, and they merit further investigation if you’re an investor.
The team behind Snap never promised to make money, entering the market with clear expectations to experience operating losses. The value of Snap has dropped, but it’s not worthless because without it, we probably wouldn’t have Instagram Stories and Facebook (NASDAQ:FB) wouldn’t be as an attractive a prospect for investors as it is today.
The message suggests that although bitcoin may be a bubble, it’s still a worthy proposition. When anything crashes, there are repercussions, but these are not always negative. The rise of bitcoin has made us consider other options and alternatives and one day, the hype may result in the development of technologies and applications that are cheaper, more secure and more functional. It’s only a matter of time before kinks are straightened and gaps plugged, so keep an eye on the companies that are powering and developing the new breed.
"Traditional investors are comparing the recent run to the dotcom craze, adverts for trading currencies are popping up all over London and its unclear if the recent all time highs are due to big heavyweight investors driving the price up. One certainty is that Blockchain technology is here to stay, bubble or not, whether thats using Bitcoin or more advanced and economical alterntive such as Ethereum." said Andrew Sung of CoinSpectator