How Low Will Bitcoin Now Go? The History Of Price Bubbles Provides Someclues
How low will Bitcoin now go? The history of price bubbles provides someclues The Bitcoin bubble is perhaps the most extreme speculative bubble since the late 19th century. Shutterstock How low will Bitcoin now go? The history of price bubbles provides someclues Associate Professor, Finance, University of Western Australia Lee Smales does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment. Nearly 170 years before the invention of Bitcoin, the journalist Charles Mackay noted the way whole communities could fix their minds upon one object and go mad in its pursuit. Millions of people, he wrote, become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. His book Extraordinary Popular Delusions and the Madness of Crowds , published in 1841, identifies a series of speculative bubbles where people bought and sold objects for increasingly steep prices until suddenly they didnt. The best-known example he cites is the tulip mania that gripped the Netherlands in the early 17th century. Tulip bulbs soared in value to sell for up to 25,000 florins each (close to A$45,000 in todays money) before their price collapsed. The Bitcoin bubble surpasses this and all other cases identified by Mackay. It is perhaps the most extreme bubble since the late 19th century. In four years its price surged almost 2,800%, reaching a peak of US$19,783 in December 2017. It has since fallen by 80%. A month ago it was trading at more than US$6,000; it is now down to US$3,500. Thats still a fantastic gain for anyone who bought Bitcoin before May 2017, when it was wo Continue reading >>
Beyond The Bubble: What Happened To Bitcoin In 2018?
It seems all too fitting that Facebooks plans to launch a digital coin were leaked in the second-to-last week of a year that saw the tech giants reputation pummeled and cryptocurrencies crash and burn. Its like grilling a shit sandwich over a dumpster fire. Bitcoinand the cryptocurrency industry as a wholeplunged this year, after a gravity-defying surge in recent years. The price of the digital coin hit nearly $20,000 late last year. And then in early 2018, it began to fall. Though it hit a few plateaus, the price has still tumbled; today it hovers at a little over $3,000. So what happened? And is there any hope for a recovery? To answer both, you have to look at quite a few factors. When bitcoin was rising last year, it seemed like a trend everyone from your grandmother to your barista was suddenly becoming hip to. Of course plenty of folks cautioned that it could be a bubble, but its always hard to realize such a thing when youre in the midst of it. Its free money, right? Why not get in on it? (Just dont remortgage your house !) All the signs, however, were there. Like previous bubbles, people were basing their belief in the cryptocurrency on their emotions, not any intrinsic value. Then there was the FOMO element, which only compounded things. Essentially, bitcoin became an international fever. Random companies were pivoting to blockchain for no apparent reason other than that it seemed like a way to create buzz. But when the bubble bursts, FOMO turns into fear of losing, which makes for an especially rapid plunge. Among those who called it, hedge fund manager Mark Dow wrote almost exactly a year ago about his decision to short bitcoin after future trading on it first began: But this time feels different. It feels like a bubble. The fever in the post-Thanksgiving mo Continue reading >>
25+ Answers - Is Bitcoin A Bubble? - Quora
If bubble is defined quantitatively as an exponential increase in price over a short period of time. Than yes, it is a bubble. From a qualitative perspective I do not think it is though. Near term Bitcoin has certainly been impacted by the positive self reinforcing loop that is a feature of all bubbles. I.E. because the price has gone up it continues to go up. I would argue structurally it differs in key areas from true bubbles in a number of regards. With the continuing price swings reflecting a combination of low availability and lack of liquidity. Most current holders of Bitcoin. Dont want to sell their Bitcoins. To the extent new supply exists. It generally comes from miners looking to recoup the costs of their operations. So the continuing rise in price reflects what it takes to pry coins out of the hands of existing holders. Which for the most part are true believers in the thesis that even with the recent rise we aint seen nothing yet. So any increase in demand for Bitcoin tends to induce a large price increase. Because there are not many sellers willing to meet this demand. This explains why generally there has been a floor to recent corrections as well. If most holders are relatively immune psychologically to falling prices. Because of their belief that Bitcoin will change the world. Than downward momentum stalls out. Because relatively little demand is needed to stabilize the fall given the absence of sellers. As long as this structure persists. Bitcoin will continue to have an upward price bias with substantial volatility along the way. Due to the lack of liquidity present in the market. Since most holders arent interested in selling. Where as what we traditionally think of as bubbles in the stock market, real estate, etc Are fueled by the changing nature of Continue reading >>
In the 2010s , various scholars and journalists have claimed that some cryptocurrencies have been involved in, or are displaying the signs of, an economic bubble phenomenon.  While some have cautioned that the cryptocurrencies may reflect the characteristics of historical bubbles, others argue that cryptocurrency bubbles are indicative of unforeseen technological problems in new economic markets.  [ better source needed ] Although there are usually strict limits on the units to be produced of each cryptocurrency, the value can still legally go to zero in the areas it is banned if it is made illegal to use. Bitcoin has been labelled a speculative bubble by many including former Fed Chairman Alan Greenspan  and economist John Quiggin .  Nobel Memorial Prize laureate Robert Shiller said that bitcoin "exhibited many of the characteristics of a speculative bubble"  . Journalist Matthew Boesler in 2013 rejected the speculative bubble label and saw bitcoin's quick rise in price as nothing more than normal economic forces at work.  Timothy B. Lee, in a 2013 piece for The Washington Post pointed out that the observed cycles of appreciation and depreciation do not correspond to the definition of speculative bubble.  On 14 March 2014, the American business magnate Warren Buffett said, "Stay away from it. It's a mirage, basically."  Two lead software developers of bitcoin, Gavin Andresen  and Mike Hearn,  have warned that bubbles may occur. David Andolfatto, a vice president at the Federal Reserve Bank of St. Louis , stated, "Is bitcoin a bubble? Yes, if bubble is defined as a liquidity premium." According to Andolfatto, the price of bitcoin "consists purely of a bubble," but he concedes that many assets "have bubble component to their price".  Continue reading >>
Economist: If Bitcoin Is A Bubble, Final Stage Of Panic On The Horizon
Economist: If Bitcoin is a Bubble, Final Stage of Panic on the Horizon Thomas Delahunty | June 3, 2018 | 8:30 am Tulip mania was a period in theDutch Golden Ageduring which contract prices for bulbs of the recently introduced and fashionabletulipreached extraordinarily high levels before dramatically collapsing in February 1637. Some skeptics consider Bitcoin to be the tulip bubble of the 21st century, but its really not so simple. Lets consider the theory of Hyman Minsky, the U.S. economist whose theories on financial fragility were highlighted during the 2008 collapse of the housing market. According to Market Watch , he believed that an asset bubble has five stages: displacement, boom, euphoria, profit-taking, and panic. Under this framework, policy adviser at the Federal Reserve Bank of San Francisco, Joost van der Burgt, says that if Bitcoinis in fact a bubble, its likely at the beginning of the profit-taking stage, meaning that panic is not here yet, but is coming. Looking back, according to van der Burgt, the displacement phase of the bubble came in the years after the release of the Bitcoin white paper in October 2008. In those early stages, the concept of the coin was catching on, but it didnt happen over night. Remember, Bitcoin didnt trade above $100 until 2013. The next phase was the boom phase, which van der Burgt describes as follows: The subsequent boom phase is characterized by prices rising slowly at first, but then gaining momentum as more and more participants enter the market, fearful of missing out. In this stage, fear of missing out ( FOMO ) sawcompanies attempting to capitalize on the industry by getting involved with coins and blockchain. In some cases, companies simplyadded the word blockchain to their namesin attempts to stir up interest from Continue reading >>
The Bitcoin Bubble Is An Example Of Faddish Human Behavior: Shiller
Bitcoin is coming off one of its best one-day performances of the year, but one Nobel Prize-winning economist sees the cryptocurrency as more of a psychological experiment than a serious investment. "I'm interested in bitcoin as a sort of bubble. It doesn't mean that it will disappear, that it'll burst forever. It may be with us for a while," Robert Shiller , professor of economics at Yale University and co-founder of the Case-Shiller Index, told CNBC's " Trading Nation " on Thursday. "To me, it's interesting as another example of faddish human behavior. It's glamorous," he added. The bitcoin craze reminds him of tulip mania in the 17th century. At that time, the price of tulip bulbs ballooned, peaked and then crashed in early 1637. The event is considered one of the first recorded speculative bubbles where a buying frenzy and lofty expectations replace rational justifications for an item's value. Bitcoin's ascent has been steep. The cryptocurrency hurtled above $1,000 in early 2017 after trading at less than a $1 at the beginning of the decade. It hit an all-time high north of $20,000 in mid-December. Prices ended last year more than 14 times higher than where they started. While Shiller does not own any bitcoin, many of his students have bought them as fractions and he says many others have likely made a lot of money off their investments. "I don't mean to dismiss it. Some smart people went into these and other cryptocurrencies," said Shiller, who won the Nobel Prize for economics in 2013. "But it's a story that I think goes way beyond the merit of the idea. ... It is more psychological than something that could be explained by the computer science department." As with most things, politics has touched this, too, said Shiller. Not a Scientific Survey. Results may not Continue reading >>
This Chart Could Explain Why The Bitcoin Bubble Hasn't Fully Burst
This chart could explain why the bitcoin bubble hasn't fully burst This chart could explain why the bitcoin bubble hasn't fully burst Google searches can reveal a lot about a person or a cryptocurrency. New research by economist Joost van der Burgt, a policy advisor at the Dutch National Bank, compared bitcoin price movements to Google searches for the cryptocurrency. The result? A nearly perfect correlation until bitcoin's price started to plunge in early 2018. Joost van der Burgt analyzed the correlation between Google searches for bitcoin and bitcoin's price. "Every time bitcoin was in the news, be it positive or negative, the price went up accordingly," van der Burgt said in a phone interview with CNBC on Wednesday. Van der Burgt said the correlation between Google searches for bitcoin and the cryptocurrency's price was almost a "perfect match" until the end of 2017. He said it might not be a coincidence that was also when bitcoin futures markets were introduced. "My take on it is that because of the introduction of futures, that might have deflated the bubble before it got to a level where it might burst completely," he said. Separate research published in May by researchers at the San Francisco Federal Reserve also found bitcoin's price dive was linked to the launch of a futures markets. Van der Burgt compared Google searches for other popular assets like gold to their prices and found no correlation. He said public awareness about an investment can help drive its prices to sky-high levels. "If the buzz is everywhere, it doesn't matter exactly what the news is about nobody wants to miss out and everybody's trying to get a piece of it," he said. This has historically been characterized as the "euphoria" phase of a bubble, based on economist Hyman Minsky's financia Continue reading >>
Media Hype Falsely Reports Bitcoin As Greatest Bubble In History
Media Hype Falsely Reports Bitcoin As Greatest Bubble In History The news cycle has again fixated on covering the reasons why Bitcoin is a bubble that may or may not be in the process of popping Media coverage this week of the alleged Bitcoin bubble and whether or not it is popping has resulted in inaccurate claims about the size of the bubble, as well as the same old comparisons of Bitcoins rise to that of the Dutch tulips and gold . Bank of America (BoA) tracked the greatest asset price bubbles in history: Bitcoin, tulips, the Mississippi Company, the South Sea company, gold, and the 1929 crash on the chart below, concluding that Bitcoin is the greatest bubble in history, according to an April 9 Bloomberg article - a claim apparently untrue both in the history of bubbles and the history of Bitcoin. Bitcoin, which has fallen more than 65 percent since its rise to $20,000 in December, is currently trading at around $6,899 . Other historical price bubbles have actually seen nearly 80 percent drops like in the dot com bubble in 2002, according to data from Investopedia , and even the BoA-mentioned Dutch tulip bubble is quoted by former UCLA economics professor Earl A. Thompson as experiencing a 99 percent loss , 34 percent more than BTCs 65 percent drop. Bitcoins price has also seen more volatility than a 65 percent drop before. From mid-June 2011 to Nov. 2011, BTCs price dropped from around $32 to $2, an around 94 percent price drop; in April 2014, BTC saw a price fall of 83 percent; in November 2013, Bitcoin crashed 87 percent. While comparing the previous Bitcoin bubbles to the current bubble is not an even comparison, due to the difference in the cryptocurrencys market capitalization, it may also not be even to compare Bitcoin, a digital currency meant to be used in Continue reading >>
Bitcoin Is Worthless, Bubble May Pop Soon, Allianz Global Says
Bloomberg the Company & Its Products Bloomberg Anywhere Remote LoginBloomberg Anywhere Login Bloomberg Terminal Demo Request Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. Bitcoin Is Worthless, Bubble May Pop Soon, Allianz Global Says Its a matter of when, not if, the Bitcoin bubble will pop, according to Allianz Global Investors. The cryptocurrency is worthless, even if blockchain technology could bring significant benefits to investors, said the investment arm of Europes biggest insurer, which manages almost In our view, its intrinsic value must be zero, Stefan Hofrichter, the companys head of global economics and strategy, wrote in a recent web post . A bitcoin is a claim on nobody in contrast to, for instance, sovereign bonds, equities or paper money and it does not generate any income stream. While one could make the same argument about gold, the yellow metal has been widely accepted as a store of value for more than two-and-a-half thousand years -- compared to less than a decade for Bitcoin, he said. In addition, the worlds largest cryptocurrency ticks all of the boxes of the essential criteria for any asset bubble, including overtrading, new-era thinking and rising leverage, he wrote. Bitcoin mania is a textbook-like bubble, one that is probably just about to burst. Hofrichter joins a chorus of commentators casting doubt on the underlying value of the digital currency. University of Pittsburgh researchers concluded its an ass Continue reading >>
On The Precipice: Is Bitcoin A Bubble And When Will It Burst?
Cryptocurrencies have quickly entered the public consciousness, sweeping up both populist support and commercial interest in the form of swathes of investors (and traders). For average people, Bitcoin represents a new currency that is based on a decentralized blockchain-powered design. The entire concept bases its foundation on airtight mathematics, whereby real-time updates to a single decentralized ledger ensure a temper-proof medium of exchange. Join the iFX EXPO Asia and discover your gateway to the Asian Markets For investors and traders alike, Bitcoin presents a supreme profit-bearing opportunity and quite possibly, a long-term store of value. Historically, all sorts of asset classes could be likened to Bitcoins whether it be property, stocks, bonds, or even fine art. The key difference is that usually, asset classes have some form of physical backing, whereas Bitcoins are digital assets that bear value only because other people believe it to have value. The value of any commodity (digital or otherwise) can rise and fall, which tends to attract the interest of investors as much as it does consumers or collectors. However, asset classes are also inherently prone to whats known as bubbles, in other words, price inflation based on future expectations. In the investment community, price inflation can occur for all sorts of reasons including a lack of supply, heightened demand or just the perception of some future change in the fundamentals that influence a particular market. When future expectations go off on a tangent and extend beyond rationality, it is said that bubbles inflate, and eventually, burst. According to financial market researchers in the 1980s, bubbles are said to be a situation when speculators purchase a financial asset at a price above its fundament Continue reading >>
Is Bitcoin A Bubble Thats About To Burst? Economists Say Yes, Crypto Experts Say No
Is Bitcoin a bubble thats about to burst? Economists say yes, crypto experts say no By Jessica Vomiero National Online Journalist Global News WATCH: Bitcoin tumbled 18 per cent on Tuesday to a four-week trough close to US$11,000, after reports that a ban on trading of cryptocurrencies in South Korea was still an option drove fears of a wider regulatory crackdown. Economists have long said that volatility of cryptocurrencies checks all the boxes of a market bubble, but in recent weeks, theres been debate about when that bubble could burst. Hundreds of billions of dollars were shaved off the total market cap of cryptocurrencies in the 24 hours leading to Friday afternoon, according to data from CoinMarketCap. One of the economists who predicted the 2008 global financial crisis, New York University professor Nouriel Roubini , told Bloomberg TV on Friday morning that Bitcoin was the mother of all bubbles, as its value fell 15 per cent to below US$8,000, continuing its spiral downwards from over $10,000 at the beginning of the week and from almost $20,000 at the end of 2017. Other major cryptocurrencies are also on the decline. On Friday alone, Bitcoin fell over 17 per cent, Ethereum fell more than 32 per cent, Ripple was down 38 per cent, and Bitcoin Cash was down over 27 per cent,according to CoinMarketCap. The question on everyones minds is: If cryptocurrencies are a bubble, is it bursting? According to experts, the real value of Bitcoin is difficult to determine because of two reasons: The currency is incredibly volatile, and trading practices may manipulate behaviour in unregulated exchanges. Joshua Gans, theJeffrey S. Skoll Chair of Technical Innovation and Entrepreneurship at the University of Toronto, argues that the Bitcoin bubble isnt going to burst because it alr Continue reading >>
Bitcoin's Bubble Is Bursting. How Low Will Prices Fall?
Just before Christmas, 2017, Bitcoin seemed unstoppable . Its value was rising exponentially as more and more investors piled in to the digital currency, hoping to profit from its sudden popularity. Other cryptocurrencies benefited too, as investors diversified their cryptocurrency holdings and arbitraged differences. Demand was so heavy that cryptocurrency exchanges crashed . Those who had held (or HODLed) cryptocurrencies for some time received the biggest Christmas present of their lives . A coin representing Bitcoin cryptocurrency is reflected on a [+] [-] polished surface as it sits in a pool of translucent liquid in this arranged photograph in London, U.K., on Thursday, Feb. 8, 2018. Cryptocurrencies tracked by Coinmarketcap.com have lost more than $500 billion of market value since early January as governments clamped down, credit-card issuers halted purchases and investors grew increasingly concerned that last years meteoric rise in digital assets was unjustified. Photographer: Luke MacGregor/Bloomberg Professional investors and amateur traders alike predicted that Bitcoins price would increase even more in 2018. Bitcoin will never crash, said one Reddit user , because then everyone would buy it when its much cheaper. Like everyone buys the dips in a highly volatile high-yield market. Others looked forward to universal adoption and a price tag in the millions. They might have trouble cashing in their windfall now, but that didnt matter. Once everyone was using cryptocurrencies, fiat currency would be irrelevant and they would be the new super-rich. Some even started setting up a cryptocurrency Utopia in Puerto Rico , principally it seems to avoid the very large tax bills they would have to pay if they ever managed to convert their cryptocurrencies to dollars. H Continue reading >>
Is It Too Late To Invest In Bitcoin? Is It Just Abubble?
Is it too late to invest in Bitcoin? Is it just abubble? Is the Bitcoin bubble really about to burst? Or does Bitcoin still have achance? In one year Bitcoin grew in value over 28 times before dropping 60% in price, this event has sparked a lot of discussion about whether the market is in a bubble or not. Before we can be sure of whether we are in a bubble we need to look at Bitcoins history. Bitcoin started off 2011 with a 30 cent price tag ($0.30), it grew to a dollar around February before soaring to $10 in June, then tripling to $30 in less than a week. The bubble burst a few days later on June 11th bringing the price down to $15 (a 50% drop, sound familiar?), Bitcoin rose again to $20 before dropping down to $5. This is currently Bitcoins biggest bubble. Growth: Over 100x, higher than the 2017 Bubble Bitcoin started the year at around $15 and reached $50 by the middle of March, by April one Bitcoin was worth $100 and in less than two weeks its price doubled making one Bitcoin worth about $230. The very next day the price dropped to $160, then to $70 a week later before rising back to $100 by the end of April. Growth: Over 17x, 60% the size of the 2017 bubble After stabalizing at $100, Bitcoin rose to $250 in November and within one month the price more than quadrupled reaching $1,100. That is over 4 times growth in less than a month. Again the bubble burst and Bitcoin dropped to $700. Growth: 11x, 39% the size of the 2017 bubble The bubble everyone is talking about, Bitcoin started the year at $900 and ended the year at $20,000 before dropping to $15,000 and then $8,000 in 2018. Growth: 28x or 2,800% growth, Bitcoins second largest bubble So are we in a bubble? Is it too late to invest? The reason why the media is going crazy about Bitcoin being in a bubble is mai Continue reading >>
Do You Think Bitcoin Is In A Bubble?
Originally Answered: Is Bitcoin just a bubble? I think the market will keep on growing with ups and downs for a while now. It will become a bubble after it becomes mainstream. Pretty sure 300 billion, the total market cap of coins, is not a big deal at Wall Street level. Its almost nothing. Facebook only is 400 billion. For now, we are +- 50% safe i think. My opinion is that in time Bitcoin market share will keep reducing, as many other coins and tokens and platforms flourish. Thats why I keep watching out for new ICOs and different startups like Caviar has a pre-sale now. Block chain technology is very disruptive. Bitcoin will more likely compete with Gold, other coins like IOTA for day to day use, others like Ethereum for companies and a backbone for other uses, so very disruptive to all third parties, and guys like Caviar will be disruptive to wall street brokers and real estate investors. No-one can predict when a bubble will burst; this is true with the stock market just as it is with the crypto currency market. In the above chart you can see how the media have tried to make this prediction and failed many times. Bitcoin is often compared to various bubbles that have happened throughout history and are commonly fundamentally flawed in the comparison. This is most likely due to the lack of understanding of what Bitcoin, and what blockchain technology is. The reason why I place crypto currencies where they are on the chart is due to the reason that Blockchain is only in the infancy of adoption, with some of the largest companies and countries exploring the technology and looking to implement the technology in the near future there is going to be an increasing amount of press coverage and commercialisation over the next few years. If you want to learn more about cryp Continue reading >>
The Bitcoin Bubble | Ploum.net
Currency is a way for people to exchange value. By itself, the currency does not have a real value. It only carries the symbolic value that people want to put in it. Try to pay with gold or euro in a Papuan tribe and you will understand what I mean. In order to keep this value to a certain level, the currency should be scarce. The first solution was to use naturally scarce elements like gold. In a more modern way, a central authority emit the currency in a limited quantity. To avoid counterfeit money, a bunch of technical measures are taken, including a serial number. You can see those measure on any modern banknote. But the money becomes increasingly virtual. For most of us, our salary is only a number on a computer screen. One might ask: how to avoid counterfeit money if its only a number in a computer? Its indeed a very hard problem. To tackle it, the central authority is constantly watching banks and institutions. There are central regulations. And do you know what? The system is producing counterfeit money anyway but in a legal way. Banks lend more money than what they own. It is easy: just adding some number on a computer. The quantity is regulated by the law but it is counterfeit money anyway. As we see, virtual money cannot work without a central institution ensuring that there is no double-spending. Here comes bitcoin . Bitcoin is a free software and a peer-to-peer network when every participant hold a certain number of mathematical objects. Thanks to some cryptographic algorithms, the network ensures that a given mathematical object belongs to one and only one participant. Participants are of course free to exchange those objects, called bitcoins, between themselves. Without the need for a central authority, bitcoins are in limited quantity and cannot be coun Continue reading >>