Jamari Mohtar 
As crypto mania grips the globe, there are those who join in the rush and those who predict its doom – 123RF

The crypto mania of 2017 has spewed a number of interesting acronyms and terminologies. Here’s my version with a twist of humour.


Enter the FOMOs

First, you have the FOMOs – the folks who have a fear of missing out on the cryptocurrency boom. They were initially fence-sitters who didn't believe in cryptos because they were very much influenced by the talk of an epic bubble that’s about to burst.

When Bitcoin hit a new high of US$1,400 (RM5.627) in May, and then US$2,000 by month-end, followed by US$3,000 a few weeks later, the fence on which the FOMOs were sitting began to shake uncontrollably.

But very soon, the movement of their fence stabilised when during one of the correction windows, Bitcoin dropped by more than US$300 in just one hour (some smart alecs then thought it was a drop to US$300).

By the time the bull’s summer of content set in, when Bitcoin rocketed to US$8,000, the FOMOs had already fallen off the fence and were embracing the midsummer crypto love affair.

They demanded an explanation from their advisers who were the fund managers and editors of investment advisory newsletters on why they failed miserably to recommend them to add cryptocurrencies on their menu of investment portfolios.


Here come the FOLOs

This gave rise to the FOLOs – the fear-of-losing-out folks comprising fund managers and editors of investment advisory newsletters who then started to run helter-skelter to include cryptos in their investment coverage after gloatingly expounding on the gloom and doom of investing in Bitcoins.

The fear of losing their clients and subscribers to the cheer-and-boom crypto fund managers and newsletters forced the FOLOs to make a U-turn on Bitcoin by ramping up the virtues of the underlying distributed blockchain technology behind the creation of Bitcoin, as the reason for the meteoric rise in the price of the cryptocurrency. I thought only well-known politicians are famous for making a U-turn.

One Singapore-based FOLO, after poking fun in July on Bitcoin as being no different from his own brilliant money-making idea of baking special recipe cookies that are unique and impossible to replicate because the recipe was handed down through the generations, had to admit in November that investments in cryptos have returns far higher than stocks this year alone, perhaps even better than the return on his cookies.

A mad rush to issue special reports on cryptocurrencies ensued among these FOLOs, which was actually a sale gimmick to introduce crypto funds to prevent the exodus of their clients and subscribers to the cheer-and-boom crypto fund managers and newsletters.

And what they have to offer via these crypto funds is some sort of derivatives with cryptos as the underlying asset, which seems far riskier than investing directly in cryptos.

Remember the sub-prime mortgage – the housing loan derivatives that brought the US economy to its knees and spread to all parts of the world, igniting the Great Recession of 2008? It seems the lessons of 2008 didn't sink in with these FOLO folks.

By early December, the bull’s summer of content became the winter of content when Bitcoin hit one mighty high after another – from US$10,000 to US$15,000 and finally US$20,000 in a flash of lightning.

This was quickly followed a few days later by the emergence of a bear’s winter of discontent when Bitcoin fell to below US$17,000 and then US$12,000 and finally US$10,000, all in quick succession.

The result: Both the FOMOs and FOLOs are now contemplating joining the FOBs and the FOMS-es. After all, if you can’t beat them, join them!


Epic bubble of the FOBs

The FOBs are folks who have a fear-of-bubble syndrome. One group of FOBs is the Nobel Laureate economic professors. This also includes the second-rate non-Nobel Laureate professors whose pronouncements on cryptos sounded as if they too have a Nobel Laureate.

They seem to forget that what is important is not so much the bubble, which can stretch for a number of years without any damage to the economy, but rather only one particular year when the bubble will burst.

Hence, they should revisit the drawing board and come out with a better forecasting technique to determine the year the bubble will likely burst, instead of being a pain in the neck of the FOMOs by their premature repetition ad nauseam of the word “bubble”, thus depriving the FOMOS the opportunity to improve their financial condition through a small, decent investment in cryptos.

I would suggest the following pointers to the FOB folks:

• Go back to the economic history book to discover that the first bubble ever recorded in history – the tulip bulb mania – occurred when futures trading made its debut in the sale of tulip bulbs. About a year or so later, the bubble burst.

• In the second case – the dotcom mania – talk of a bubble gained momentum in 1997 and over a period of three years, shares of internet companies continued to reach new highs (on average an increase of 500%), until they reached an all-time high in late 1999. Then the bubble burst. For companies that survived the crash, Amazon for instance, its all-time share price high of US$106.69 in December 1999 was only repeated and breached 10 years later in 2009.

In the case of Bitcoin, talk of a bubble gained momentum in 2013. But 2013 was not the equivalent of 1997 for the dotcom bubble due to:

• Bitcoin reached its then record high of US$1,200 in December 2013 – the same year bubble-talk gained momentum, not two years later as in the dotcom mania when the ultimate high was reached.

• In May 2017, this all-time high was repeated and breached – in just four years and not 10 as in the dotcom crash.

Thus, the crypto bubble did not burst after 2013. It was just a major correction of Bitcoin from 2014 to 2016. The fact that bubble-talk gained momentum again in 2017 reinforced the notion that the bubble-talk of 2013 was premature. So it’s 2017 that can be considered as the equivalent of 1997 in the dotcom bubble.

This would mean Bitcoin price will continue to rocket in the next three years until it reaches the ultimate all-time high of a 500% increase in price by 2019.

With the current price at US$14,000, an increase of 500% over the next three years means Bitcoin would have to reach the ultimate all-time high of US$84,000 in 2019 before the bubble bursts.

This is a simplified attempt to arrive at a ballpark price where a bubble will burst. The Nobel Laureates with superior resources and funding can do better, including improving the accuracy of the margin of error in their forecast.

But all bets are off if Bitcoin repeats its 2013 pattern, which means the ultimate all-time high of US$84,000 could arrive much earlier as in this year. It is not for nothing that I have often said Bitcoin and cryptos are new animals.

In my next article, I will attempt to elaborate on how cryptos could play a stabilising role in the economy. I would also reveal who the other group of FOBs is and who the FOMS-es are. 

Jamari Mohtar is a veteran journalist who used to work in Singapore. Comments:

This article first appeared in Focus Malaysia Issue 266.