A state of FOMO

Have you heard the word FOMO? If not, here it is: Fear of Missing Out. This usually happens when  something is going up crazily to the point that almost everyone wants to get in with a fear of being left behind.  When there is no fear of buying something too expensive and only fear of not getting enough, it is often the time to be afraid of.  This is what we are seeing at the moment for cryptocoins. I said not to chase bitcoin when it was around $10000 just a couple of weeks ago and now it has touched $20000. I’m really looking like stupid in the hindsight but I’d still like to say, don’t chase it, period! This really looks like a mania that all the sudden everyone is talking about bitcoin now and wants to get in regardless. This is a very risky time to buy it with a serious amount of money. If you do so, you can be easily shaken out if it drops down 20-30%, which can very easily  occur at any moment.  Of course, don’t get me wrong as I’m not talking about the ultimate top for bitcoin that will not happen years later. I’m only taking about a short term risk for it and I could be wrong of course. Maybe this time is different and  bitcoin simply goes up nonstop from here. No one has a crystal ball when it will correct but I’m very sure a more serious correction can happen sooner rather than later. If you are good at short-term trading, this could be a great time to trade but for most long-term investors,  it is better to wait for a better entry.

 

With enough warning about the short term risk, what is a more fundamental risk for bitcoin? I think the regulatory risk among the top for the bitcoin future. While as I said before, I don’t think it is feasible for any government to totally ban bitcoin as long as there is the Internet and countries where one can trade bitcoin, it could threat to the pace of its adoption  if a major country like US government wants to totally ban bitcoin. The good news is that this risk in the US appears to have substantially reduced now.

 

Early this week,  U.S. Securities and Exchange Commission ("SEC") Chairman Jay Clayton talked about the crypto market and ICOs. He was clear that the agency is closely watching the space for violations of securities law and potential consequences for companies using ICOs.  Of course, it is widely expected the SEC will eventually put in some regulations to regulate the ICO market, which in the long run actually is good for its smooth development. But the really fear has always been that the US government will try to

 "ban" ICOs or even cryptocurrency trading. Well, Clayton actually offered his support to the trend and he even encouraged investors to learn more... Here is what he said:

 

    We at the SEC are committed to promoting capital formation. The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike.

 

I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. When advising clients, designing products and engaging in transactions, market participants and their advisers should thoughtfully consider our laws, regulations and guidance, as well as our principles-based securities law framework, which has served us well in the face of new developments for more than 80 years.

 

This sounds to me really positive and not a SEC chair who was thinking of banning ICOs as what China did a while ago. I feel more confident that bitcoin/cryptos will continue to develop becoming a widely recognized vital component of our life, just like what the Internet means to us. Of course, it is a long-term trend for years to come.