Topic: Just because prices are high, doesn't mean that is a good investment. - page 6. (Read 757 times)

If you come when the price is high then obviously it's not the time to go in and place a price order. They grew because of the high level of investor confidence in the past. And you come at a time where it's impossible to show anything when looking at crypto prices already having foreign commodities and holding on so far. It shows that investing in crypto has provided huge benefits.

Humans beings do apply such logic in their ways of life. They normally correlate the same situations to the things they buy and invest into. We often have the mindset that costly things have more durability than cheap ones. Which is so wrong.
That has been a norm that will be difficult to change from people's mindsets. The same applied in the crypto sphere

A potential coin can't define base on her price rather it's her usefulness purpose when it's able to survive a bearish market and bounce back strong in price

If you take crypto as a whole, it's a lot like the dotcom bubble, except this bubble lasts for much longer and it's also not as big and mainstream. And some companies survived the dotcom bubble to become the tech giants we know today. How many coins will remain relevant after a potential crypto bubble burst? I think aside from Bitcoin, no coin is safe. Even Etherem, the second biggest coin, is not that useful as it pretends to be.

2017 seems like a rather arbitrary starting point though. Bitcoin has been called a bubble as early as 2011. Heck, 2013 alone saw two bubbles, both of which hit mainstream media at the time.

The thing is, when it comes to Bitcoin the term "bubble" has lost all meaning since the market cycles are just much, much faster. Looking at the broader market, stock market bubbles like the dot com bubble or even the 1920s crash ruined people's lives because it took decades to recover. With Bitcoin bubble cycles lasting 4 years each so far getting caught at the top has been less of a problem. Of course there might come a time when the timeframes between ATHs become longer and painful, but when that will be is anyone's guess. Maybe 65k USD was as expensive as BTC ever will get. Maybe 300k will. Or maybe 1MM. We'll see.

I definitely agree with you on this. The value of the price doesn't guarantee anything about the potential of a cryptocurrency. There have been so many cryptocurrencies in the market whose price was really high but decreased very sharply at some point and never was able to recover since then. People shouldn't fall for every cryptocurrency just because its price is at a nice level. The most important thing is to do a detailed research about the project and then decide.

I understand the difference between commodity and common stock.

I used commodity as a way to also include anything that can be speculated on like oil and soybean futures.

I am sorry for the confusion that had ensued as a result.


I didn't intend to imply that an asset with a high price is always bad, I just made this post to state that sometimes prices rise due to reasons other than the actual fundamentals of the actual commodity in question (e.g. hysteria or wild prices).


Well, I would like to disagree.

In a perfectly efficient market, all information about a particular coin will be available to everyone in it.

This is in stark contrast to the actual information that most coins show, which is often very scant.

If crypto is an efficient market, then Bitconnect, OneCoin and all of those other scams wouldn't have got to the size they had.


Not every bubble lasts the same, some last for decades and others for mere hours.

Also, the starting year of 2009 is not when the bubble started as it took until 2017 when Bitcoin hit $20k that the crypto industry started growing.

That makes this bubble around four years old, less than the dot.com bubble.

Thank you, I was going to point that out myself.  I'm not sure if OP understands the difference or just wrote the wrong term (repeatedly).  Oh, and I'm a believer in the efficient market hypothesis myself, to an extent.  There are times when the market can be very, very irrational and valuations can either be inflated or less than the true value.  That's what makes Warren Buffett such a good investor.

If you take a look at most stocks right now, you'll see that they're trading at P/Es that are extremely high.  That indicates to me that they're not good investments right now.  Some of them may represent great companies, but you have to buy their stock at the right time, when it's close to its real value (or undervalued).

And with crypto, who the hell knows what the real valuation should be for any of them?  Your guess is as good as anyone else's.  I think the crypto market is probably the best example of an efficient market, because a coin is worth exactly what the market says it's worth at any given point.

An asset in general having a price doesn't automatically mean good investment, but it doesn't automatically mean it's a bad investment either. It's simply just that solely looking at the price itself is a really bad metric to make decisions upon.

General rule of thumb: Don't invest in an asset because its price went up. If the price moving upwards is your only reason to get invested, you'll have no reason to stay invested once the price inevitably drops.

That being said, dismissing an asset only because its price is high can be just as bad as blindly investing for the same reason. Arguably pretty much all assets are overvalued these days but remaining on the sidelines can be just as bad a proposition as inflation eats away on your purchasing power while you're waiting for a dip.

Well.... Bitcoin and Crypto currencies has now been around since 2009 (12 Years) ..... so if this was one of those "Dot Com" bubbles... it had to burst a long time ago. The pre-bubble period of the Dotcom bubble went from 1995 to 1997, the actual bubble took place from 1998 until March 2000 and the bubble-burst from March 2000 until the low-point of the NASDAQ score in October 2002... +/- 6 years.  
Source : https://www.grin.com/document/197166

Berkshire Hathaway are one of the most desired shares in the world.. because one of the richest men in America owns most of it and stupid people follow rich people's recipe... but they never get it right, because they do not get the insider information that these rich people get.  

Commodity differs from Common stock.

In an efficient market (EMH), it is said that the price reflects all available information. So if the price is high, yep, it really is a valuable stock. But "investment" means %-return thus the future and not the present that is important. It is how you predict the future profitability of a firm, basically predicting the future.

In commodity, I believe it is easier, basically depends on utility and scarcity.

Anyway, I believe your point is to warn people about risk in investing, sadly there will always be dumb money. And the dumb money usually comes from uninformed everyday people.

I have seen this kind of argument that just because the price of a commodity is high means that it is a great investment.

To a certain extent, a high price often means that investors have faith in the fundamentals of the commodity (For example, one of the most expensive shares in the American stock market is Berkshire Hathaway, which has consistently outperformed the S&P 500 since 1965).

However, there is the potential that high prices don't actually show genuine interest in a stock, but rather frenzied speculation on a commodity that has poor fundamentals.

A prime example of this happening was at the dot com bubble in the early 2000s.

What happened was companies that were, to be frank, pretty shit had managed to get multi-billion dollar evaluations because investors believed that the internet had fundamentally changed the business landscape forever.

As a result, people quit their jobs to trade full time, media stoked up the desires of getting rich and everyone believed that this gravy train will carry on rolling on and on forever.

Then the combination of increased interest rates, the majority of the aforementioned companies burning through cash and investors becoming aware of it all lead to the technology and by extension the entire economy to collapse while a few key members making big money.

This entire situation was the very exemplar of the title as companies that had billions of dollars turned out to be worthless at the end.

Be vigilant.