Playing with crypto is not a shortcut to getting rich

Right now anyone who got into cryptocurrencies before 2017 and held on is probably feeling pretty good about themselves. In many cases, people have doubled down by using their "house money" to buy tokens that have gone up faster than some of the mainstream cryptocurrencies. Well done my friend.

But we should all remember what happened in 1999-2000 in the peak of the original dotcom era. Everyone was a genius, people believed it would last forever and quit their jobs to join the "gold rush" and we all know how that ended. Yes, for some people it turned out fantastically, but the majority of people were harshly returned to reality, or worse.

Then came the pre-housing crisis real estate bubble. "It's so easy, just buy a bunch of condos and flip 'em" was everyone's strategy. And it worked... until it didn't.

Of course, this is not new. It happened with tulips, sugar, gold and of course modern day stocks, bonds and now cryptocurrencies.

At some point reality will set in. When your neighbor, your uncle, your non-techie friend and mainstream media are talking about Bitcoin, it's time to pause and reflect. That's where we are now.

So while I applaud and love all the great innovation that is happening with the emergence of Bitcoin, Ethereum, blockchain, ICOs, tokens, DAPPs and content here on Steemit, it is my opinion that most of us will find value as simply being users of the new applications created on these technologies and only very few will get rich off them.

But why? This is about decentralization and spreading value to the early adopters and users unlike protocols of the past, right? True, some value will be more evenly distributed, but it will not be a way to get rich quick. Over time the markets will become efficient and value will be more commensurate with the inputs.

Let's think about an example from the original web era... many e-commerce sites were started that ran up to ridiculous valuations relative to the actual product/service that was offered. It was a way to generate an outsized return relative to the amount of investment in time and human capital... but that only lasted for a short period of time.

Markets then sorted everything out and now to develop a profitable and sustainable e-commerce site, it takes a LOT of work. There are no shortcuts and the get rich quick strategies have been long gone.

The same will happen in the cryptocurrency/token world. We're in the initial period of outsized returns relative to the inputs, but the markets will become efficient and financial value will require much more input.

The key question is when will all this happen, or for those who are trying to time the market, how much longer do we have?

It only took a few years for the dotcom mania to correct itself and the pace of change is much faster today, so it is logical to expect a shorter window. If you assume a starting point of around the beginning of the year - when BTC, ETH, LTC and ICOs all started their big run, then we're a little more than a half a year in. I would say we are talking about months not years.

The bottom line, if you've done well through all of this, it is probably time to take some chips off the table.

If you're just jumping in and counting on this to be your new job, pay off your mortgage, fund retirement, etc. then here's what you need to believe...

...You have a distinct advantage over the majority of people in this space.

By distinct advantage, I mean 1) you need to understand the technology better than the majority of people (remember, the millions of people already playing in this space are a fairly technical bunch, so you need to be smarter than them), or 2) you have some proprietary information advantage over everyone else whereby you can time the market and get in/out when others make the wrong choice.

...AND, the recent run up of value is both sustainable and has more room to run.

You could make a case for this for sure, but you also have to factor in the enormous uncertainty related to economic volatility and correlations that have never been tested, regulations (governments will not stand idly by), technical risk, user adoption, etc. Bottom line, it is not all upside.

So what do you believe?