The Coming Spinoff Bubble



If someone wanted to make a few million USD in a few weeks, at this unique time in history it seems all they would have to do is make a better fake dev team and website (i.e., spend an extra 5 minutes proofreading) than Bitcoin Gold or Bitcoin Diamond, come up with a plausible gimmick, include a modest premine of 100,000 coins, schedule a fork from BTC (or BCH) in a few weeks from now, contact Bittrex and Poloniex, and let Core fans know. Even if the market price is only $100, boom, instant Lambos! They can even stay fully anonymous ("proof of true cypherpunk status").



So I don't see why there won't be a bunch of people doing these spinoffs in the coming months. Many likely will be worth a few hundred each.



And imagine what happens when the serious people come in. Time for BitThereum / Aetherium? Properly done, that is bound to be worth more than $500 as long as Bitcoin Gold and Diamond are.



In other words, this is the next goldrush, akin to the premined altcoin goldrush. No one noticed it before apparently. And there's not even any need for a premine (if these dumb-money investors even care), they can just change to a brand new PoW and buy up all the appropriate equipment in advance (or if they want to make even more, get an ASIC made just for their new algorithm).



20 of these at an average of $500 each means $10,000 tacked on to the total Bitcoin price (BTC+BCH+BTG+...). And that could just be the beginning, because if BCH rises to say $4000, all those other spinoffs might ride the wave to $1500 or so each, and suddenly we get our $50,000 Bitcoin.



You might be wondering: where does all the extra money really come from? How are we hodlers getting all this free money thrown at us?



Well, when people bring up the "market cap dominance index" I always object. I explain that it's a flawed measure by pointing out Bitcoin is the most widely held and broadly dispersed ledger, whereas something like Ripple is the opposite: most of it is held by a few people who are slowly trickling it into the market. This overconcentration in a few hands vastly increases both the market cap and the per-unit price beyond what it otherwise would be.



This is the situation with many of the "top" coins on coinmarketcap.com. Ethereum started via ICO rather than mining. Dash was heavily ninjamined, NEM heavily premined. Besides Monero and Litecoin,* the story is similar down much of the list.



Puffed up market caps, puffed up coin values...for as long as the wealthy premine beneficiaries hold most of their coins tightly (Vitalik was already wealthy before ETH, and as for the rest, once you make $10 or 20 million, why sell the rest? At least for a few years).



But Bitcoin has always had the opposite dynamic. Its pure mining start, long history of intense ups and downs over many orders of magnitude, and sheer popularity and household name value have made the market cap and unit coin price relatively the least puffed up by any overconcentration of holdings.



The many spinoffs are the undoing of this. They introduce this puffing up effect for Bitcoin that was missing since 2013 when Ripple kicked off the heavily premined altcoin craze. This is where the "free money"** comes from; most other altcoins already got it, but Bitcoin never did.



Hopefully there will be secure software that automates the process of sweeping all these spinoffs so people can sell them.



Also, this flips the dynamic of "gotta sell some bitcoins so I can put a little into each possibly-viable altcoin just in case" on its head. Now the dynamic is, "I already have a lot in every spinoff so no need to sell any BTC or BCH to buy some, in fact gonna sell off the really dumb spinoffs and maybe even take some profits on the more promising ones."



Instead of altcoins (alt-ledgers) eating into the Bitcoin ledger's market cap, the spinoffs feed it. Even the partially premined spinoffs. No more, "How the heck did OmiseGO and NEO come out of nowhere and reach #10? Where were those announced?" Now it's, "You already own it. Take the huge gains if you want 'em."



*even these fairly mined coins experience far more concentration than Bitcoin because they have a shorter history and came in when crypto was already a big thing (rumor has it that at one point Goat owned half of all outstanding litecoins, and imagine how much monero Risto Pietila owns as he went in at the very start with millions



**The trick is, it's not really free; it goes to those who sell off the shit-spinoffs early, from those who buy them early and hold them down to zero. Similar to how Ripple (XRP) doesn't really get a free ride; the money comes from people who keep buying as all the old hodlers and premine beneficiaries finally get around to selling (assuming Ripple eventually fails; if it somehow succeeds, this "free money"/"early puff-up effect" just gets subtracted from the ultimate price gains for holders; instead a pump now and a dump later, it becomes a boost now and blunted gains later) . In other words, overconcentration of holdings leads to easy pumpability, but the tradeoff is *eventually* easy dumpability (but as we've seen with Ripple, "eventually" can be years out in a gradual slide or "glass ceiling"/"blunted gains" effect). Bitcoin will be exposed to that dynamic if the spinoff goldrush happens, and like with Ripple and others, it should first result in a huge pump, the dump coming gradually over months or years (but note that this is superimposed on the normal bull/bear bubble dynamics, and the current crypto bubble is liable to pop at any time; we're talking about a bubble within a bubble here))