I wrote in my last article I bought a Bitcoin, and now I feel sick that Bitcoin is in a bubble; whether you agree with that or not is your opinion, but apart from the argument of the Bitcoin bubble, there is an indisputable cryptocurrency craze that is much worse than just a Bitcoin bubble. It seems that any company that has a relationship with Bitcoin, cryptocurrencies or blockchain technology is in a bubble. If the name of a company includes "Bitcoin" or "blockchain", its actions have been providing returns that we have not witnessed since the Dot-Com bubble.
This is disturbingly similar to the previous bubbles that we have witnessed. During the Dot-Com bubble of & # 39; 99 ̵
That said, the blockchain technology is not Bitcoin. The Blockchain technology is probably revolutionary, while Bitcoin is essentially useless (that is, it has no value, or its value is indefinable). It is not prudent to use Bitcoin as currency to buy goods or services because the price is rising so quickly. This price appreciation can make you pay more than $ 100 million for two pizzas, as a gentleman did years ago when paying for his dinner with Bitcoin. So, if you can not use it as a currency to buy something, and when you "invest" in it you do not have any property in a company, what is really worth? What is really a fake coin in your electronic wallet ? ?
In general, the people who bet buying Bitcoin do not know the separation between the blockchain technology and Bitcoin, causing them to raise the prices of the shares of the companies related to Blockchain. A perfect example of this irrational exuberance is Riot Blockchain Inc. (RIOT), formerly known as BiOptix Diagnostics Inc. This is a biopharmaceutical company that has had nothing to do with blockchain technology or Bitcoin. Before the change of name, they saw that the price of their shares gained almost 100% in just a few days. After the name change, the share price rose another 17%. Many people find out that their friends and family earn a lot of Bitcoin money and want to join the madness in any way they can. It sounds a lot like what happened during the days of Dot-Com, right?
Unfortunately, it does not stop there. A company that has been publicly listed for more than 20 years, On-line Plc (ONL), had its biggest appreciation in the stock price when it decided to change its name to "On-line Blockchain Plc". It went up more than 390% in one day! Another company changed its name from "Grand Pacaraima Gold Corp." to "First Bitcoin Capital Corp." (OTC: BITCF). The SEC had to stop trading in OTC: BITCF after it rose more than 6,000%.
It is not limited to having "Bitcoin" or "blockchain" in the name of the company, simply by having any relationship with Bitcoin, an organization can raise significant capital and quickly increase its value, without any logical reason. Take Bitcoin Investment Trust (OTCQX: GBTC), for example. In 2016, they had $ 0 in revenue, $ 0 in cash flow, $ 85,164,000 in net income and $ 166,246,000 in net assets, however, this company is worth $ 3.11 billion. Are these financial fundamentals equivalent to more than $ 3 BILLION valuation? I do not think so.
In 2016, Bitcoin Services Inc. (OTCPK: BTSC) had a net ordinary income of $ 69,217, $ 89,652 in cash, $ 117,677 in total liabilities (the company is only $ 11,430 in insolvency), and its CEO / CFO / Director, Joel C Schneider, had recently been disqualified from practicing law in the state of New York. The company also caused a creditor to file a lawsuit against them, in which they reached an agreement by issuing more shares. They have changed their name six times in the last 20 years, and it seems that many of these name changes were made in a similar effort: take advantage of the current bubble. By aligning the name changes with the dates of the corresponding bubbles, the company was able to significantly increase its value. Directly from the 2016 BTSC Annual Report:
"Bitcoin Services, Inc. (the" Company ") was domesticated in Florida in February 2016. It was originally incorporated in Nevada in 1997 under the name of" JLL Miami Enterprises, Inc. " until January 2002 when his name was changed to "BMX Holdings, Inc.", until February 2003, when his name was changed to "Direct Music Group, Inc." until April 2004, when his name was changed to "Cell Bio-Systems, Inc.., "Until June 2006 when its name was changed to Tulip Biomed, Inc and finally until February 2016 when it changed its name to Bitcoin Services, Inc. On December 21, 2015, under Nevada NRS 78.347 A Custody Appointment Order was issued to Hamo Enterprises, Inc. to comply with NRS 78.180 to reinstate the Company to the Nevada Secretary of State in accordance with the Nevada Statutes, and as a result, on January 6, 2016, the Company reinstated its commercial license with the State of Nevada. 11, 2016, the company filed the Certificate of Amendment with the Secretary of State of Nevada changing the name of & # 39; Tulip Biomed, Inc. & # 39; a & # 39; Bitcoin Services, Inc. & # 39; As of February 12, 2016, the Company became aware of certain information when it gave rise to a judgment based on the State by Confession, dated February 10, 2010, against the Company involving certain US Patents. US, then Patent Applications and trademarks not used by the Company, along with their corresponding state withholding right. "
However, Bitcoin Services Inc. is worth $ 281.50 million. Again, this assessment does not seem deserved Organizations with these characteristics, bad business practices and no business model should not be valued at these inexplicable levels.
If the people who participated in this madness took the time to investigate the companies in which they "invest", they would see Many of these companies have been sued by creditors, and they have stated bluntly in their annual 10k reports that their daily operations could cease at any time.Most people are not wasting their time researching these companies and are throwing money at blind due to the common fear of investing, "The Fear of Missing Out." Nobody wants to be on the sidelines while their friends, family and school Gas boast of their incredible returns and new riches. This has been nourished in the self-fulfilling prophecy of this madness.
Other organizations are simply benefiting through Initial Currency Offers (ICO) by taking advantage of unsuspecting "investors" and the unexplained bubble in cryptocurrencies and related markets. The image below is a screenshot of an ad on Facebook for a new coin launched. " More than 161% ROI expected for the token holders, with exponentially growing dividends when reinvested in mobile mining units." Wait … what? Did this announcement only promise 160% more returns on an investment? That statement alone says a lot about the craze of the cryptocurrency that we are currently witnessing.
Below is another example of an ICO, this ad appeared on Instagram. There is no shortage of these ads, and similar ICO, that are offered throughout the web. Normal IPOs (initial public offerings) in real companies are intrinsically risky and are often a poor investment for individual investors; What could make ICO look like an "investment" worthwhile? The people of this ICO are participating in the pure game; they rely solely on the hope that someone will buy them later at a higher price.
Other companies that have operated a successful business for years have also seen a significant increase in their value by adding blockchain companies to their portfolio. Take Overstock.com (OSTK), for example, announced its investment in blockchain technologies through its new subsidiary Blockchain. Only in 2017, the stock has risen more than 300%.
In addition to this incredible anomaly that we are witnessing with cryptocurrencies and blockchain technology, many Wall Street professionals also consider that the US stock market. UU The US stock market in general is getting ratings never seen before and has many investors on the edge of their seats. Below is one of Warren Buffet's favorite market valuation tools: the total capitalization ratio of 5,000 Wilshire versus the US gross domestic product. UU Current market valuations dwarf the most catastrophic bubble assessments in US history. UU
Source: St. Louis Fed
You can argue that there is, or not, a Bitcoin bubble almost indefinitely. However, it is much harder to argue that there is no cryptocurrency / blockchain craze that haunts markets today. Companies without a developed business plan, without future business prospects, minimum profits, without assets and questionable management teams do not deserve the extreme valuations that the market is giving them. These companies are not solid investments, they are essentially useless, however, they are being valued in millions and even in billions. This madness has reached the point where people are simply injecting money, hoping that they can find someone to buy them in later. As people have been lucky enough to find others to buy at a higher price, many believe that this will continue in the long term. However, prices can only rise so high. When the maximum point is reached, as it inevitably will be, there will be no one to continue buying. At the top, someone will be holding the bag and suffer defeat defeats. As this madness continues, people must continue to educate themselves about the companies and the "assets" in which they are investing. Between the craze of cryptocurrencies and the current valuations of the US stock market. UU., This is a crucial moment to ensure that your investment objectives align with your "investments." It is often better to lose a bit in the previous period to save yourself from disastrous losses. As Warren Buffet, the most successful investor in the world, has said: "Rule # 1: Never lose money, Rule # 2: Never forget rule # 1."
When you have everyone, from the postman until your grandmother presenting ideas of "investment" of shares and cryptocurrencies, you know that you are entering dangerous territory.
Disclosure:  I / we do not have positions in any action mentioned, and there are no plans to start any position within the next 72 hours.
I wrote this article myself, and expressed my own opinions. I am not receiving compensation for it (which is not from Seeking Alpha). I have no business relationship with any company whose actions are mentioned in this article.
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