Dumb Money

From China to Bitcoin, Dumb Money is everywhere

“The bubble is too big and the prices too high,” said Liu Zhou, founding partner of Fortune Capital in Shenzhen, at a conference last week. “I’m worried the industry is overheated.”

Last week, the price of bitcoin increased 40% over 40-hours. With that surge, bitcoin is up 1560% on the year.

This year, Chinese venture capital and private equity firms raised double the amount as 2015. David Su, a Chinese investor, used to spend weeks or months on due diligence before putting money to work. In a now saturated market, he sometimes only has three hours to make those decisions. Weeks or months gives us analysis-based decisions; hours gives us little more than intuition.

Some people are calling bitcoin “a bubble.” But bubbles don’t happen with smart money. They happen with dumb money. It seems we see a lot of dumb money in the market.

As one entrepreneur said about bitcoin: “I’m 90% certain this is a bubble. I just don’t know if it reverses itself at $20,000 or $100,000.”