Cryptocurrency

The latest cryptocurrency frenzy is fueled by FOMO

People are investing thousands in ethereum because no one wants to lose out on the next bitcoin boom.

Cryptocurrency

Cryptocurrency

The latest cryptocurrency frenzy is fueled by FOMO

People are investing thousands in ethereum because no one wants to lose out on the next bitcoin boom.

Ethereum, a decentralized network inspired by bitcoin that can support financial transactions as well as other types of apps, is ascendent. Its cryptocurrency, ether, was trading at over $400 each earlier this week, leading to speculation that ether would soon be worth more than bitcoin, an event people started calling “the flippening.”

Ethereum is, at its most basic, a blockchain-based cryptocurrency that includes a scripting element. Think of it kind of like this: bitcoin keeps track of transaction data, ethereum keeps track of that and computer programs. “Ethereum” refers to the company, founded by programmer Vitalik Buterin, as well as the blockchain itself. An “ether” is a unit of ethereum blockchain-based currency, which acts as an incentive for people to participate in the network.

But unlike bitcoin, which can actually be used as a currency to buy and sell goods and services, it’s almost impossible to find things you can buy with ether. The decentralized applications that it’s meant to support like Ethereum Name Service, which offers wallet-specific domains, or portfolio service Prism are all still in their infancy. The market price of ether seems to be fueled by hype, speculation, and fear of missing out on another bitcoin-like boom, which made many early adopters unexpectedly rich.

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“We missed our first chance, but won't miss our second chance,” said one Reddit user who invested $3,200 on a computer rig to mine, or generate, ethers. The Reddit user, who identified themselves only as Curtis out of fear that relatives would come knocking for handouts, said they and their spouse had discussed investing in ethereum back in 2015, but promptly forgot about it. They heard about it again last week, and went on to purchase both the rig and $300 dollars worth of ether.

Most ether investors declined to give their full names for privacy reasons as well as a desire to not broadcast their wealth (hacking is still common in the cryptocurrency world). “My main reason to pour some money in would be to not regret it later on,” Reddit user TehBananaBread wrote when asked why now. “Maybe ethereum and other currencies like that is the ticket to something bigger, better.”

Another recent investor, Rich, invested in ether because “it just made sense” to them. Between bitcoin and ether, Rich has invested a total of $1,000 dollars. Specifically to ether, Rich had read that “companies will be needing to use it for smart contracts” (a common enough term for an “if this, then that” computer program using the ethereum blockchain) in the future. “Thats [sic] going to be big!”

“My main reason to pour some money in would be to not regret it later on.”

Reddit user Pewpewwwwwwwwww said they had considered and passed on bitcoin, but the price run-up in bitcoin caused them to look at ether. They invested $1,000 in the currency and are considering converting a $2,800 gaming machine into a mining rig. “Sounds cool tbh,” they told The Outline. “And im [sic] a loser, and like getting and spending money on stupid shit.”

If all this sounds super speculative, that’s because it is. Of those who responded to The Outline’s questions, none mentioned exactly what they intended to do with ethereum beyond make money.

“As you mentioned, a huge part of the spike in ether [...] has to do with investment and speculation,” Alex Sunnarborg, a research analyst at CoinDesk, said in a written statement provided to The Outline. “As the price increases, more media covers it, more people speak about it positively, etc., it creates upwards acceleration.”

According to Sunnarborg, the fear of missing out is real. But the exact reason why any one person might invest likely traces back to a mixture of reasons such as the continued growth of cryptocurrencies, the popularity and price of bitcoin combined with its political and literal stagnation, and successful crowdfunding efforts — often called “initial coin offerings” or ICOs — using ether.

Nobody wants to sleep on the next bitcoin.

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