• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Rev's Forum: Cryptocurrency, Blockchain Frenzy Reminiscent of Web Bubble

There is no question in my mind that the cryptocurrency frenzy will end badly, but trying to guess when and how is impossible.
By JAMES "REV SHARK" DEPORRE
Nov 27, 2017 | 07:40 AM EST
Stocks quotes in this article: RIOT, XNET, OSTK, GROW, SRAX, LMFA

"Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little."
―Fred Schwed Jr. 

Holiday seasonality worked exactly like it was supposed to last week. The indices did well, but what really stood out were the pockets of strong action in many of the cryptocurrency and bitcoin plays. Traders went on a rampage in the group and caused crazy moves in names such as Riot Blockchain Inc. (RIOT) , Xunlei Ltd. (XNET) , Overstock.com Inc. (OSTK) , US Global Investors Inc. (GROW) , Social Reality Inc. (SRAX) and LM Funding America Inc. (LMFA) , among others.

While the number of stocks in this sector is very small, the speculative frenzy in bitcoin, which is now approaching $10,000, has an impact on the broad market. When there are such huge moves and big profits, traders tend to look for other opportunities, and that helps to keep a bid under the market. When you are making money in some very questionable small-caps, then the risk in other parts of the market doesn't seem that bad.

Typically, after a good Thanksgiving week the indices will be weak on Monday. Some profit-taking and consolidation is normal, but one thing this market hasn't been for a while is normal. The usual ebb and flow of emotions doesn't apply like it once did. Instead, we tend to have very aggressive dip buying, which leads to extremely strong underlying support. Pullbacks are never a cause for concern. They are always just another buying opportunity.

One story we are sure to hear today is how the frenzy in the cryptocurrency and blockchain plays is similar to the Internet bubble back in 1999-2000. The fundamental basis for these moves is very questionable at best, but the frenzy of buying is drawing in a crowd of folks who don't want to be left out.

There is no question in my mind that the cryptocurrency frenzy will end badly, but trying to guess when and how is impossible. It is much like a Ponzi scheme. As long as there is a willing supply of buyers, these names can run to ridiculous heights. However, when new money stops flowing into the group, the destruction will be brutal.

The reason frenzies like these work is that traders are confident they can escape when the turn does occur. Some do, but many end up being caught by surprise and are too quick to think a bounce will save them.

If you are playing the crypto/blockchain game, make sure you are locking in some gains along the way. The goal is to limit risk when you have a big profit.

The indices are mixed in the early going. Weakness in China was an issue, but anticipation of a historically weak Monday following Thanksgiving is keeping market players sidelined in the early going.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Rev Shark was long OSTK, GROW, GCAP and LMFA.

TAGS: How-to | Risk Management | Stocks | Investing | U.S. Equity | Markets

More from Investing

This Is No Market for Commitment

James "Rev Shark" DePorre
Jul 6, 2022 4:55 PM EDT

After Tuesday's rotational moves, Wednesday was choppy. Here's why this is not a time to make long-term trades.

This Won't Hurt a Bit: Moderna Could Rally 25% From Here

Bruce Kamich
Jul 6, 2022 2:59 PM EDT

The stock is ready to make a recovery rally.

Can You Spot a Rally Coming for Spotify?

Bruce Kamich
Jul 6, 2022 1:26 PM EDT

Let's see where investors can go long on SPOT, according to my read of the charts.

Move Over Minnie, I've Got a Love-Hate Relationship With Disney

Stephen Guilfoyle
Jul 6, 2022 1:00 PM EDT

DIS has been no day in the park for investors -- in fact, it's been acting more than a little Goofy lately. But I see this ride down starting to turn.

DoorDash Looks Ready to Make a Dash to the Upside

Bruce Kamich
Jul 6, 2022 12:35 PM EDT

Let's review the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:01 PM EDT PAUL PRICE

    A Recent Director Buy in Children's Place (PLCE)

    Four of the most recent insider trades in Children...
  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login