As Bitcoin crests the 6k mark, I felt the need to emphasize some essential plot points from the last time the cryptocurrency market surged. Please sit back and enjoy my cynical telling.
Speculation was a large driving force behind the tremendous bubble and subsequent crash around January 2018. When the larger, more established crypto assets slowed in growth, they turned to smaller, newer coins in hopes of mythical 10x returns. Every day, increasingly mainstream news outlets glorified the rise of the crypto millionaires. Bright eyed, bushy tailed “traders” hopped behind their keyboard and started hunting for their piece of the crypto pie. To their excitement, they made money. Everyone made money. It was a bull market.
Let’s take a moment to revisit my point about the smaller coins. When bitcoin was growing only a couple points per day *gasp*, there were brand new shiny projects blowing up overnight as traders bandwagoned every project with a whitepaper. To cater to this crowd, projects issued tokens promising shares of just about anything you can tack the prefix “blockchain” onto. It was all too common to see a project raise hundreds of thousands of dollars in Ether by selling tokens for their new idea that was little more than a couple pages of buzzword-riddled technical jargon and an ERC20 token.

It’s astoundingly easy to issue tokens with an Ethereum smart contract, yet the fact that a token is issued on such an established platform imbues a false sense of authenticity in even the scrappiest of vaporware. I can, right now, create a token and issue as many as I want to whomever I please in less than half an hour by following a tutorial. Unfortunately, naïve investors tend to skirt any semblance of due diligence in an excited fervor. Furthermore, the enforceable scarcity of a decentralized, limited supply can contribute to a sense of urgency in potential investors, even if the underlying assets are the wisps of an idea.
Among other issues, projects started to raise funding earlier and earlier, often before any kind of MVP was deployed. In such a pro-funding climate, projects sold tokens and scrambled to list them on exchanges to further pump premature valuations. Source code for the smart contracts used to issue tokens was deployed quickly, and with little auditing, which left many projects vulnerable
I don’t mean to say that the sudden influx of capital to the crypto ecosystem was exclusively diverted to scams. Large quantities of funding went to strong, positive projects that developed the space through major technical contributions. Blockchain awareness and literacy was furthered as well. Regardless, after enough projects ran away with investors’ Ether with nothing to show for it besides now-worthless tokens in 2018, the speculation came to a lemming-style collapse off a cliff, and in all likelihood it will happen again.