The following article was written as both a public and private article for a media site my colleague and I owned. We do not maintain this site, nor link to past content to the site, as the content is no longer relevant. From 2013 to 2017, we wrote articles about the cryptosphere. At the time, the cryptosphere was a nascent industry that had a few good ideas, but a growing amount of bad ideas. This article was written almost a year before we exited the industry. This article is no longer relevant as the cryptosphere is nowhere near $40 billion now.

Yesterday, the cryptosphere neared $40 billion with over $1.5 billion in volume for the day. The crypto-token bitcoin led the pack with over $750 million in volume. Early adopters will still remember the day when the bitcoin hit $750 million in market cap. A volume at that level at that time felt like a dream. Meanwhile, the entire cryptosphere saw a volume of over $1.5 billion and this is an entire industry that didn't even exist a decade ago.

Warning

The following past research article covers the cryptosphere. Both the public and private version of this article were written in 2017 and are not relevant after this time period. In addition, at the time the cryptosphere was new, but frequently changed in ways that did not benefit users of the crypto-tokens. Since the time of this public and private version of this article being published numerous changes have taken place. In addition, even to this day, many crypto-tokens in the cryptosphere are complete scams that are get-rich-quick-schemes for insiders. Often, we cannot know this beforehand and only later discover this. A person should only trade with money that they're willing to lose because losses are guaranteed. If you choose to participate in purchasing a token in the cryptosphere, you should do so with the full expectation of a loss and you should also expect it to change in a manner that does not benefit you. There are very few good ideas in the cryptosphere. Finally, no crypto-token in the cryptosphere is immune from cyber attacks, quantum computing or any innovation that makes the digital world irrelevant.

Ether and Dash Join Bitcoin: Mint Millionaires

Bitcoin minted the first round of millionaires as a crypto-token. This year, Dash and Ether have joined bitcoin, minting millionaires with graphs showing uptrends since their projects started. If they continue to innovate - and this is a huge if because we see too many crypto-tokens self-destruct, Ether and Dash could remain serious players in the cryptosphere. Meanwhile, we're beginning to see the evolution of ideas expand - like dot com stocks helped create the rise of other related industries, we're seeing other ideas in the cryptosphere outside of tokens. For instance, recent media have alleged that BHP Billiton is using Ether for its supply chain. I know some other commodity giants are considering blockchain technology for this type of application.

Keep in mind that this is a new industry that's budding and most people have no idea what bitcoin, a crypto-token, or the cryptosphere even is. As these projects innovate, they will know what all of those are. For the time being, I fully expect we'll see a correction from this high market cap value, though timing tops is not something I'm interested in trading (in the same manner, I'm not interested in timing bottoms). I note this point because as many of us who've been in the cryptosphere a while will tell you, corrections can be significant - 90% or more sometimes.

To put that into context, if you risked $1,000 in a crypto-token, it is not uncommon to see it plummet to less than $50! As I repeatedly warn, no one should consider this industry if they can't stomach losses.

Global Wealth

The cryptosphere makes up a total of 0.00019% of global wealth at the time of this writing. We aren't even close to 1% of global wealth.

I view that number growing as more people discover other ideas where this technology can be applied - and will be applied. For now, one could argue that we may see a limit of $100-300 billion in total mark cap over the next few years with the current set of ideas, until other applications are discovered. As the industry as a whole continues to innovate, makes itself relevant as new challenges appear, and leverages existing ideas and new technology, the cryptosphere as an industry may grow into the trillions.

Ether, Factom, Digix, and a few other projects have caught mainstream attention outside the cryptosphere this year. Will they be able to sustain this attention along with their ideas? There's a low probability of this, but more attention could mean people think about new ideas or other ideas that become future winners. Additionally, companies are beginning to see value in this industry.

If you look at the Consensus 2017 speakers, you'll realize that many major players now pay attention to this industry. When I first mentioned bitcoin and the blockchain while working for a top ten Wall Street firm when it was less than $20, no one cared. In fact, leaders laughed at the idea of tracking bitcoin pricing data (not selling it, but simply keeping its data). Now, that same firm is paying attention to the cryptosphere.

Cryptosphere Expectations

As I type this, over 1,000 crypto-token ideas exist and some of these ideas have become crowded. Many crypto-tokens are overdone because of all the attention or the promise of getting rich quick. I fully expect that the top projects will eventually command 80-90% of the total market cap in their idea. For the time being, we should expect people to debate what these top projects are and like the top companies of any industry, I fully expect these will change in time too. Make no mistake: I don't know what the top projects are. I can only guess, but there's a strong probability that I'll be wrong.

On the one hand, more attention could mean more money enters the industry. But more money and more attention could mean that more ideas spread and attention also spreads. Competition becomes fierce in this situation. As a capitalist, competition is good. But competition means that some projects will fail or won't live up to their promises. Again, losses are guaranteed because we all die in the end.

Bubbles Validate Good Ideas

Bitcoin has validated Austrian economics, though I find it humorous that some of the beneficiaries of this want the industry regulated in the name of "preventing bubbles", which will harm the industry. Bubbles happen whether you want them to or not, but the price of quality projects after a correction is still higher than when the bubble began. You can be wise like Vitalik Buterin and see this [dead link], or you can be ignorant like the mainstream media and fail to see this reality [dead link]. A correction destroys bad ideas, bad projects, and deceptive innovation.

Americans would be extremely wealthy now if they let the S&P 500 experience an actual correction - which companies could survive? Those companies would end up owning the stagnating assets of the poor performers and expand the wealth of the entire country. Which new companies would enter? Yet, Americans think stability is great, when several corrections would flush out the bad while creating room for the good with the index hovering at over 5,000 right now (if they allowed corrections).

Bubbles raise awareness, but they also flush out the incompetent. Prosperity destroys fools and a bubble makes people feel prosperous. Only the people who don't trust prosperity and success survive: they were the ones from day one who were focused on their vision, not on the distraction of success. Never forget that success distracts. Failure reminds. Most people cannot handle success; they sabotage what made them successful. Companies are no different. This is why I welcome bubbles. In the end, the quality projects (like the quality companies) will always reset at a higher price after the correction than their price before the bubble began.

Never forget that one of bitcoin's most spectacular bubbles - the 2011 bubble - saw a rise of bitcoin from less than $1 to over $32 with bitcoin experiencing a 93% drop in price, yet still above $1. Bitcoin never fell below $1 again and today bitcoin is over $1,000. That is the power of allowing extreme prosperity so that we can all see who's using it the best and who's really fake, because when the chips fall - and they will - no faker can hide.

The Time To Leave

Eventually, there will come a time to leave the cryptosphere. In my view, that time is not yet [reminder that this was written in 2017]. We should consider this perspective in everything. We love seeing the growth and recognition of this industry, but we won't be here forever.

The Cryptosphere Nears $40 Billion