The last couple of years brought some really heavy and uncertain life circumstances for all of us. From the global Covid19 pandemic to wars and skyrocketing inflation rates, we have seen it all. And we felt it, too.
The global pandemic did not only take away a lot of lives but also took away jobs and left people struggling to take care of their basic human needs. This and everything else in between made people realize that a “new” market can be a good new way to start something. We are talking about the crypto market, of course.
Even though the crypto market was not exactly new in the literal sense of the word, it certainly was a new way, a new approach in the financial world. The story started back in 2009 with the creation of the first-ever cryptocurrency – Bitcoin.
The beginning was rocky and full of non-believers who quickly lost interest, but the story continued to this day, making progress and bringing innovations with every single move. Of course, there are still skeptics, but there are also market crashes, massive financial losses, and scammers lurking and waiting for their next victim.
The 2021 investment mania
Last year at the beginning of May, a series of events made another so-called investment mania. This time, the mania wasn’t about the stock market or the broader financial system, but was mostly related to the crypto market.
Investment manias abound and are certainly not completely unheard of, but what are they, you ask. Well, let us try to explain in simpler terms. It is not just the fact that people started investing more in cryptos, or buying more stuff related to these coins. But also that it somehow became “popular” to be a part of this world and contribute to social media chatter, even if you were a regular user making hot investments and weren’t one of the investment firms, regardless if you had eight bitcoin or eight thousand.
Being highly volatile, cryptocurrencies are one of the riskiest assets, but it didn’t stop the mania. Promises of easy money, ferocious demand, Bitcoin at the top of its game with value of over 50,000$ for a single Bitcoin, NFTs on the rise along with collectible items… All of this can make your head spin, so you maniacally try to get your hands on some cryptos asap.
Now imagine that happening to a lot of people worldwide. Really a lot of people. You can see where we are heading, right? It was certainly a market propelling phenomenon, especially with younger generations. Traders are going crazy, prices are going to the moon, and looks like everyone is buying digital cat art? Yes, that is exactly what happened. Then, you didn’t have to be a chief investment officer of a respectable crypto company as a financial vehicle to make it big, quite the opposite.
Governments of multiple countries decided to help their citizens cope with pandemic losses by giving them a financial boost. These government cash infusions moved the regular market a bit forward because people spent more money on things and services.
What also experienced a change is, of course, the crypto market. People started investing in cryptos more and deciding to make their savings crypto savings.
NFTs, sneakers, and trading cards
In May of 2021, people went insane for the famous NFTs or non-fungible tokens. There are tens of thousands of these digital tokens, which are mainly used for art pieces, music, videos, drawings, photographs, GIFs, etc. (We were serious about digital cat art.)
You could even make a profit on the public market from trading cards sales, trading basketball highlight clips or other esoteric categories, which fellow collectors were very interested in acquiring. During this market frenzy, everything from crypto art to digital trading card sales and other assets went through the roof. Even the famous New York Times decided to say a few words about this phenomenon.
The shocking 69 million dollar digital artwork sale of an NFT – a digital art piece called “Everydays – The First 5000 Days” by the artist Beeple made lots of heads shaking in disbelief. That art piece was undoubtedly the most expensive piece of digital art ever. Was this a financially sound move for the person buying the NFT? Hard to say. Another purchase that became planetary famous is a purchase of a single trading card for 1,3 mil $. That was a card featuring Tampa Bay Buccaneers’ quarterback Tom Brady.
People seemed to be spending whooping amounts of money on such random things. On the other hand, the popularity of collecting also random things, both digital and physical, did not stop growing. Among the other items, sneakers have also become collectibles. People all over the Internet claim that sneakers investments are pretty smart and payable. We are not sure what exactly to think of it, so we are leaving it to your judgment. One thing is for sure, it is not unlogical.
We can imagine a pair of ultra-famous sneakers, say Air Jordans costing tons and tons of money if they are the only ones left on the planet. People like to own one-of-a-kind things. That seems to be in our nature for some reason. It makes the whole shebang around meme-coins and the investment mania where everything from crypto art to trading cards sells for insane amounts of money, doesn’t it?
What happened after the mania?
Experts from across the globe have a theory about something called a bubble. This is an economic term, and it is used to describe a certain phenomenon. A bubble appears when a single asset, a sector, or even an entire market’s worth gets so much bigger than its true value. That tends to happen when the selling price of something is way bigger than the cost of making the product. The bubble goes through 5 stages. It begins with something innovative, cheap to manage, and with lower interest fees. The frenzy soon takes over. We can kind of see that pattern with NFTs.
Everyone wants to get their hands on the stuff. (Sounds familiar, right?) What happens when everyone wants the same thing? Its price is going through the roof, no matter how much it’s actually worth (hence the 69 million $ JPG, with all due respect to the artist).
So, the demand is rising, and so are the prices. What is the eventual outcome of the unstoppable growth of the bubble? Well, the experts say it will have to burst at some point. And once it bursts, we’ll see the rise of special purpose acquisition companies and businesses declaring bankruptcy left and right, along with the many, many people who’ve abandoned bitcoin and the other cryptos.
Did the bubble burst? Oh, absolutely. It all made crypto look like fake money, having only emotional value for crypto fanatics and involving more risk than ever. Remember the Tera Luna coin, the NFT crisis? The shocking Bitcoin drop?
Not to sound like crypto skeptics, but the final step in this bubble theory is a crash, and our beloved market did crash. We have to admit that the crypto market has been struggling to get back on track, but there is still an optimistic prognosis.
People around the world wholeheartedly believe that the NFTs will rise again, Bitcoin will recover from the last drop, and the market will once again heal. The only thing we can do is try to learn from our past mistakes and be smarter about our decisions. And for the rest, we will just have to wait and see.
Connor Wilson is a 20-something crypto analyst who's been involved in the cryptosphere since early 2015. He has a background in mathematics and computer science, and first got interested in Bitcoin from reading about it on /r/bitcoin. Connor is currently focusing on developing analytics tools for blockchain projects.