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I don't believe in this whole thing at all. It is newsworthy how many investors and analysts have recently asserted that bitcoin — and by extension, all cryptocurrencies — are in a bubble. This in a day where the Dow is up to almost 26, and all indexes are at all-time highs. A few analysts are saying the stock market is in a bubble.
Yet Robert J. If there is a bitcoin bubble is it bursting or about to burst? Some investors — Schiff in particular — make some salient points about bitcoin and bubbles. Therefore, it is worth examining the nature of bubbles, and the arguments that cryptocurrencies are in a bubble, to determine whether the space is still worthy of investment.
Analytic capabilities appear to fail when it comes to crypto. So many assert the bitcoin bubble you would think the contrary position would be gaining advocates. But again, none of these analysts or articles explain why bitcoin is a bubble; they only assert that it has bubble qualities, by which they mostly mean that it has experienced a sustained parabolic rise.
Is a parabolic rise a necessary and sufficient condition to label a phenomenon a bubble? Necessary, perhaps, sufficient no. Is bitcoin a stock? Is it a commodity? Is it a currency? Where is the value, and how should it be determined? Other paradigms flesh this out some. Economic historian Charles Kinderberger applied Hyman P. The Minsky Model identified nine stages of a credit cycle see chart , which Kinderberger refined to five stages see red circular chart below and compared to most stock market or single stock bubbles: Displacement, Boom, Euphoria, Crisis or Profit-Taking, and Revulsion or Panic.
Today, this has been called the Kinderberger-Minksy model of a bubble. Grantham, who believes that neither U. Note that by this definition, Grantham is focusing on price and earnings, which relates to value.
First, the fundamental economic conditions must look at least excellent — and near perfect is better. Second, liquidity must be generous in quantity and price: it must be easy and cheap to leverage.
The sine qua non for bubbles might be fundamental value relative to excessive price, but how does one measure the fundamental value of bitcoin or other cryptocurrencies? Bitcoin is not a stock. There is no product or service and it does not generate an income stream. Bitcoin is the face of blockchains and digital currencies. It might be called part stock, part emerging currency, and part commodity. As a kind of stock, Cryptocurrencies have become - to retail investors - the de-facto face of the blockchain they represent, even though at times, a direct correlation cannot be shown.
They are more like fiat currency, because they are the digital face of the fiscal and economic potential of blockchains and digital ledger technology DLT in the same way a fiat currency is the face of the economic potential of a nation. The present and future value of bitcoin are impossible to accurately estimate. The rising value of bitcoin is the result of the present valuing of a future stream of potential benefits.
If in the future it exceeds these benefits the price may go much higher. If it disappoints, the price may crash. As the Commodity Futures Trading Commission CFTC notes, this is still a risky speculative investment — and speculative investments are prone to bubbles. However, this does not mean that bitcoin is currently a bubble. There is credit margin but exchanges are still difficult to navigate for the uninitiated.
We're on the path of digitizing the world. We are seeing the final phase of the Post-Industrial Revolution which started in the ss with the invention of the microprocessor through to the expansion of the Internet. Starting in reverse order, definitely not in panic five stage model , or blow-off four stage. For example, the dive in the market after China announced closure of its exchanges. But these are smaller corrections than some of those in the past. Are we in euphoria? According to Investopedia , in the euphoric stage of the dot.
In this way Woo, in Bitcoin Investing: A 10, Year View , is incorrect that bitcoin is in the early stages of the mania phase. Smart money is just beginning as is the awareness of the average retail investor, and the obstacles to retail investors are in the early stages of being overcome.
Are we in the boom phase? Without question bitcoin and cryptocurrencies have gained increased media attention since around to , but institutional money is just weighing whether or not to invest. What is true is that bitcoin and cryptocurrencies — as well as the technology that undergirds them — is gaining increased attention and becoming more widely known. Exchanges are still responding slowly and most seem overwhelmed. Coinbase has been reported to have over , new sign-ups every week, a factor driving the popularity of its three now four, including bitcoin cash added in December trafficked currencies bitcoin, llitecoin, and ethereum.
Blockchains and DLT are still being tested and have not come close to being fully integrated in industry. This is why some displacement may still be ahead. Bitcoin, and other Cryptocurrencies, have not yet clearly displaced anything. Real technological displacements may still be to come. Bitcoin could still crash — but not because it is in a bubble. Bitcoin — though different than Amazon — has defied most value and bubble chart analysis over its history.
Bitcoin should also not be compared to tulips, because tulips are just The Tulip craze spanned four months. Bottom line? So, where are we? It seems likely that because the disrupting phase of blockchains and DLT cannot be shown to be over — and may likely be just beginning — that the entire phase of bitcoin from its inception to the present may be a long disruptive-early boom stage.
That is, bitcoin and Cryptocurrencies may only be in the mid-boom stage of their development with plenty of upside to go. The mania-euphoric stage has not even begun. According to The Guardian on December 2, , the cryptocurrency market has been dominated by crypto nerds and retail investors — serious investors are just coming on board.
If true, this is typical of the early Boom 5 stage cycle or Awareness 4 stage cycle phase of the cycle. Professional investors dominate the shorts. Institutional investors have, so far, stayed on the sidelines. Regardless of the model applied, bitcoin looks to have much more room to run.
There are many reasons bitcoin may fall from where it is today. There are also many reasons it may continue up. It may or may not end up being the top cryptocurrency. It may or may not fulfill its potential value. This is the nature of a speculative investment and is different from saying that it is in a bubble. Cryptocurrencies like bitcoin are presently the best retail face of the blockchain. Could bitcoin become a bubble?
Will all cryptocurrencies survive? Is it possible that many, including bitcoin, could crash and burn? Should investors put their life savings into the space? Will bitcoin continue to experience significant corrections after run-ups? Should an investor or speculator diversify and have a plan for taking profits, ideally at the tops after run-ups?
Will the cryptocurrency space continue to be volatile and risky for the foreseeable future? Though all of the preceding is true, cryptocurrencies are here to stay and there is yet profit to be made. Is bitcoin in a bubble? Not even close. Formerly he was a Regional Director at a national top RIA; he currently manages a family investment company, writes, and publishes the Common Sense Interpretation Websites.
He has Coinbase and Kraken accounts and positions in bitcoin, ethereum, and litecoin. This report should not be viewed as investment advice or a recommendation, but is for informational purposes only. Read more articles by Seaborn Hall. Sponsored Content.
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People are Confused About Bitcoin
By KeithOctober 19 in Bitcoin. Btc has allowed the development of a new ecosystem that today capitalizes abovemillion, now while talking about the death of bitcoin, it has not stopped advancing on its way towards a growing adoption. It is as simple as it sounds, adopting as ibtcoin btc as it always creates new bubbles in it causing its constant deflation, and this is analyzed, the fact that not only occurs with btc but with many cryptos. Getting too excited can lead you to a very narrow line of death with btc, ahat in euphoria at a top I don't think it's good for you. According to CMC the total cap of Bitcoin as I am writing whay reply is Billion dollar and by it can be growing. Now, Bitcoin is a very volatile asset hence many called it as just another bubble. Yes, it can be dangerous if one is not careful
Why the cry ‘bubble!’?
Bitcoin and other cryptocurrencies look like they are in a bubble here inin terms of historic bubbles, but no one can predict the future. The questions we want to ask ourselves are 1. To offer a quick answer, Bitcoin is clearly bubblynot unlike the stock market itself is, but over a shorter period of time.
In fact, that statement sums up my theory on what is happening. It is like the stock market from —playing out over the course of 10 years roughly then, the Npt market is a bubble-and-bust economy moving at something like 10x to 20x speed.
Bitcoin, it just sort of does this over and. Thus what we are seeing are many mini-bubbles aa a result that one could call a bubble, or could just call the result of supply, demand, a dash of manipulation, lots of emotion, and the general dynamics of markets creating a bubble-and-bust economy.
It only means that it is more likely that the Bitcoin bubbles and busts will continue to occur and on a quicker time vitcoin than in the traditional markets. All of that said, Bitcoin clearly has almost every feature of not only a classical economic bubble, but a series of mini bubbles repeating over and over like in the stock market over time.
A big difference between Bitcoin and past bubbles is however substantial. If we all did, we would all be rich.
One way this is like the dot-com bubble what if bitcoin is not a bubble that third party tokens are being given absurdly high valuations like off-brand dot-coms were in the dot-com bubble. The bubble and bust nature applies to the market as a whole and to the top coins with proven value, many other lesser tokens are less likely to keep going.
Time keeps on slipping… into the future. And thus we grow wiser in retrospect. Below are some updates before we get to the original article. Consider the following images, for us to be fully sure we need time to consider what happens. The classic economic bubble compared to Bitcoin. The Bitcoin bubble compared to the. Notice how a popped bubble can end up being just a phase in a bigger pattern?
If this is true it confirms the 10x — 20x or so speed. If that is true, it helps to confirm the theory of cryptocurrency being a bubble-and-bust economy in hyper-speed. If this is the type of bubble it is, then it has vastly different implications than Bitcoin being a one-off bubble like the South Sea Bubble. If this pattern plays out Bitcoin could reach all time highs again within a year… and that could create yet another bubble! Bitcoin image below to see more examples of bull traps.
Now however, in April it again looks like a return to the mean phase. This is very clearly a bubble and bust economy on a number of time frames.
Cryptocurrency is the perfect mashup of global market, light regulation, human emotion, speculation, and credit… and thus it bubbles and it busts, and bubbles and busts, and bubbles and busts. Will it bust next or wll it bubble some more? That question can only be answered in retrospect.
Check out the chart below with Bitcoin bubbles overlaid from to Bugble is likely this pattern will what if bitcoin is not a bubble repeating at a rapid pace for as long as cryptocurrency remains a bibble option although periods of stagnation in between should be expected. Comparing the dot-com on the left with the Bitcoin bubble on the right. Notice how juts that look like the start of a new rally end up being not.
Further, this is common in other markets, Bitcoin just moves quickly so the effects are more intense. Potential Bitcoin Bubble as of Nov. If it is a bubble… then it is an even bigger bubble on Nov.
This looks like a bubble pop for Bitcoin. Necessary disclaimer : This article is not meant to be taken as investment advice. See full disclaimer in the sidebar and links in the footer. The market is volatile and has a history of mini-bubbles, busts, and recoveries. TIP : If the terms on this page are confusing you, feel free to use our sister site cryptocurrencyfacts. In other words, Bitcoin has all the markings of a [semi-popped at this point] bubble here on September 28,just like it did back in after its quick initial rise to the top, and just like it had a few times in the past.
Since Bitcoin has all the markings of a classical economic bubble, traditional investors who if they study history have seen many such bubbles, think Bitcoin is in one. Simple as. However, if we define a bubble by both its rise and its popped state that is, a state of quick decline followed by a length period of stagnation then it is from that perspective that the future is a little less clear.
In other words, Bitcoin has a history of bubbling and busting as new demographics get excited about the technology both the underlying blockchain and the overlying cryptocurrency token Bitcoin.
Of course, it also has a history of recovering and soaring to new heights. Top bubnle Bitcoin Crashes. After some initial waves of adoption from forward, the digital asset class known as cryptocurrency exploded into the mainstream in October of with Bitcoin leading the charge… only for the what if bitcoin is not a bubble market to crash back down again starting at the end of That however is, like, you know, just an opinion.
Boom crash, panicked sell-off. The exchange called my margin in. Darn, I should have sold high. Something like. No one wanted to re-enter the market, no one wanted the asset. If everyone gets bubbls off of bitcoin, and everyone goes to sell, there will not be enough buyers if we can judge by the current market.
In a case like that, the bubble could pop hard like the tulip bubble. However, that assumes people will stop wanting Bitcoin like they stopped wanting tulip futures… and that is hard to see that really happening at this point. People tend point to the. After-all, the. Meanwhile, the tulip bubble is the classical example of a bubble along with early bubbles like the South Sea bubble.
So it makes sense to note when talking about bubbles. What causes economic bubbles? However, despite those references, and despite agreeing that the. The reason for comparing the current cryptocurrency market to the Video Game market before is not due to price, but due to the rapid production of off-brand products in the case of cryptocurrency, ICOs and Altcoins.
NOTE : The. Now consider, Bitcoin itself is a really solid concept and the leading cryptos, say the top 10 by market cap, tend to be toojust like playing Atari games at home was a really solid concept. Bitcoin, like other top cryptocurrencies, is a decentralized digital currency you can use world-wide, trade, invest in, and even develop if you have the chops!
It is built on revolutionary blockchain technology. It, in short, has a lot of use-value for what essentially amounts to passwords to a contract on a public ledger. When many novices iff a market biitcoin the supply side, and when they get preyed on and burned by those seeking to make a quick buck including well intentioned novices on the demand sideit weakens the resilience of an already green and thus likely weak kneed market.
People had bought too many crummy off-brand systems and games, and department stores had overstocked their shelves. There was too much supply, and no longer any demand.
People threw out their off-brand systems and games and went back to physical pong. They declared the silly video game fad. What if all the new people entering the market to try out ICOs have a bad experience? That series of events, mixed with the roller-coaster like movement of cryptocurrency in general, could lead to bibble long downturn and not just manic and depressive price fluctuations like we have seen to-date. That is speculation, but something to think.
If enough people what if bitcoin is not a bubble burned from ICOs and altcoins, the result could be that people lose interest in cryptocurrency and go back to fiat currency and traditional securities sold on the stock exchange for a few years.
When people got burnt by the. It will take more than. Like with the. So yes the. Bitcoin and some other cryptocurrencies are solid concepts, it is what is happening bjbble them iss the coins themselves that should be the concern. Understanding ICOs. TIP : Learn more kf bubbles. Or, learn more about cryptocurrency from our bitvoin site where we have been writing about cryptocurrency мой what was the price of bitcoin 4 years ago вотafter getting botcoin in it around the time of the first bubble.
TIP : Bitcoin could very well not be in a bubble, but rather just seeing a meteoric bubbble volatile rise in price in which hard downturns should be viewed as corrections.
Those who claim to know if Bitcoin is in a bubble are not are essentially just offering their opinions. Are Bitcoin and Other Cryptocurrencies in a Bubble? An Ongoing Examination of the — Bitcoin Bubble Bitcoin and other cryptocurrencies look like they are in a bubble here inin terms of historic bubbles, but no one can predict the future.
An overlay of past Bitcoin bubbles. Games from the actual Atari burial ground. What do you think?
Bitcoin is Special
Experts believe it was the combination of several factors, including a general bullish trend on the metals market, a high demand, and a subsequent decline in the car industry. Altcoin News. Today, almost everyone knows, many know that BTC is more expensive than golden ounces several times. Market prices are ultimately just what the very last stock or very last Bitcoin traded at. Risk 5: Cryptocurrencies are getting banned by institutions and countries A number of major international banks are banning Cryptocurrency purchase using credit cards. They are more like fiat currency, because they are the digital face of ia fiscal and economic potential of blockchains and digital ledger technology DLT in the same way a fiat currency is the face of wjat economic potential of a nation. What is the second realm? They counted on someone making money for. As a natural consequence, the shares of The South Sea company collapsed and left both investors and the British economy in ruins. Now, almost all biggest e-shops accept BTC. For what it is worth, I am of the opinion that anything on the credit side of a ledger is a liability…. Scott Sumner Dec 12 at pm. Actually there is very good reason why investors might have revised their expectations nt future earnings in late buhble, we were entering the Great Depression.