Dogecoins are looking down, but not out
Has anyone visited /r/dogecoin lately? If not, check it out. It's filled with threads from people who are selling all their dogecoins for bitcoins. Some shibes are criticizing them for bailing on dogecoin. There's also a post from the famous guy who predicted the November bubble in /r/bitcoin talking about why dogecoins will recover later.
The people who are selling dogecoins are doing exactly the right thing. All altcoins are inflating at the moment, just as they have during the initial phases of the previous cycles. In a week or two, expect altcoins to reverse and for /r/dogecoin to be peppered with posts complimenting each other for not bailing out.
Today's altcoin mining report
In an example of how messed up the cryptocurrency world seems to be recently, look at
http://shoemakervillage.org/temp/altcoins2014-05-31.jpg.
The data is only valid for Saturday. Notice how feathercoins were the most profitable scrypt coin to mine for a third of the time Saturday.
What is so special about feathercoins that people are buying them? They've been around for ages, and usually altcoins are moving on to the newest and greatest thing all the time.
Can history really be repeating itself again? I mean.... seriously???
Yes.
Where is China?
There hasn't been any bad news from China in many weeks. A telling sign will be whenever the next piece of bad news comes out. If the reaction is negative, there will probably be a temporary reversal and the cycle could be delayed. If there is no reaction, like there wasn't with the Mt Gox news, then there will be no reaction to any future Chinese news for now.
However, there is always a threshold in the cycles where bad news starts to have an impact again, causing flash crashes that quickly recover, even during the up phase. That doesn't start until after the all-time high, so it's not at that point yet.
Imagining an alternative scenario
Imagine an alternate scenario where bitcoins were backed by gold, and that there were somehow a way to pin the underlying value of bitcoins to gold. It is impossible to do this with known technology, but if it were, my suggestion is that we would find that the system does not grow like the one we are seeing here.
There have been enough bubbles that economists will likely start taking notice of this after this cycle. Since there has never been a currency like bitcoins before, they may find that the natural behavior of assets with zero innate value is to have bubbles with a known period. With bitcoins, these bubbles generate press and spur new development. As a result, bitcoins would not have succeeded if they were pinned to something, even though the technology would have been the same and they could have been used for the same purposes.
Other
- Days until July 24: 53