Understanding the Hype: Bitcoin Bubble
Volatility has been Bitcoin’s constant companion ever since it’s inception.
Skeptics and critics alike will always make it a point to remind you of this.
In fact, the new hot buzzword is the bitcoin bubble.
Bitcoin is booming and there are many people out there just waiting for it to bust.
Bitcoin has been performing very well this year
In fact, it’s up nearly 400% in the past year.
Even despite a few corrections the past few months, Bitcoin has well out performed more well-known investment avenues like the S&P 500.
This has led to a few big name investors to speak up and prove that Bitcoin is still misunderstood and underestimated by the mainstream media and is still an unknown to the majority of people at this point.
We’ve got people like Jim Cramer who is crediting the future price of bitcoin hitting the golden $1million mark purely because he thinks European banks will need to buy a lot of bitcoin to prepare for future cyberattackers demanding payments in BTC.
Not only are the European bitcoin exchange markets ranked 5th in terms of trading volume, but furthermore, the biggest ransomware attack EVER gained a whopping $100,000.
So to attribute the future million dollar BTC price on this misguided assumption is proof enough that bitcoin and cryptocurrency is not well-known to this guy.
When Mark Cuban is saying Bitcoin is in a bubble because “everyone” is saying how easy it is to make money if you buy bitcoin, he’s also mistaken.
Go to your local gas station or grocery store and ask the clerk or fellow customer if they own any bitcoin.
Go ahead and ask everyone you come in contact with during the day.
The fact is that relatively very few people have heard of bitcoin, let alone have taken the time to look into it, and even fewer still have taken the time to figure out how the heck to buy it.
If you want to decide for yourself if we are experiencing a bitcoin bubble, it’ll help to understand what a market bubble is.
Investopedia defines a bubble
"...an economic cycle characterized by rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive selloff occurs, causing the bubble to deflate."
http://www.marketwatch.com/story/is-bitcoin-in-a-bubble-this-metric-suggests-theres-more-room-to-grow-2017-06-08
Basically you know it’s a bubble when the vast majority of people are investing in an asset just because everyone else is investing in it. This causes the price to quickly rise well above what it’s valuation should be. The bubble pops when there are no more unsuspecting, uneducated investors to buy into the hype and panic selling kicks in.
The main reason why I don’t believe bitcoin is currently in a bubble is because the pool of potential investors is international.
Can you wrap your head around the millions of people who have yet to buy into bitcoin or cryptocurrency in general and what that will do to the price of bitcoin?
Don’t get me wrong, I’m sure there will be more price corrections in the future but I believe the price of bitcoin will continue to rise.
Skeptics love to call this a bitcoin bubble. Now I’m not here to tell you what to invest in and when, but I feel the need to clarify what a bubble is so that you can have some knowledge on this subject and come to your own conclusions.
Additional Reading/Sources:
Investopedia Definition of Bubble
Jim Cramer's Attempt at predicting BTC price
Mark Cuban Thinks BTC is in a bubble
MarketWatch Article Shows BTC has "Room to Grow"
ZeroHedge Article Gives Great Explanation of BTC Bubble Hype
BTC Chart
Great post that describes about bitcoin bubble. I really love the post.
I absolutely love your post. This is something I keep saying to people who use the bubble term. Most people dont even know what bitcoin is. Bitcoin may hit a bubble at some point in the future, I mean im sure its possibly destined, but we are nowhere near close to that now, this is just the growth phase, which is exciting for all those who are apart of it right now, cause this has not hit the mainstream yet. People have no idea, they cannot conceive yet what this actually means. The entire world will change.
I doesn't have to ever go into a bubble if the dollar goes down. Million dollar bitcoin is a given, but will a million buy an island, a house, a car, a vacation, or a coffee.
Thanks @heiditravels for the post. I like the perspective you take regarding how many millions of people globally who have the opportunity to invest or buy into Bitcoin. I personally don't think it's a bubble either but I am no expert on economics or investments
A stock market bubble is when your cab driver is telling you about a hot stock investment.
Bitcoin isn't even close to being in a bubble.
I talked to every lyft and uber driver, they say i heard about bitcoin but have no idea what it is lol
I like your definition of stockmarket bubble. I am not sure about your conclusion. In the pub down the street where I live we regularly discuss cryptocurrency investments. That pub is also frequented by cab drivers.
Make it the shoe shine man.
Two real reasons why some people like Bitcoin to get busted:
They are shorting bitcoin ( their losses are increasing as bitcoin rises)
Envy/Jealous - they don't have bitcoin at all and want to buy at Low Price.
Here's why a lot of people are so negative about Bitcoin and cryptos:
I saw this a few days ago... still laughing! :)
it is clearer to understand with pictures :-D
I like the image lol😂😂
Hi, it is funny, my bet is bitcoin is still at a low price ;) the bitcoin bubble is hype but also true depending on your opinion on what is a bubble, some say all that have no physical backing is a bubble from the time of its creation just needs time to grow to its poping point which bitcoins bubble is a long way from yet, I think.
Thanks man for sharing your opinion.
I LOVE EVERYTHING about your blog and always look forward to your youtube vids keep up the great work Heidi. Let me know if you ever need any photos would love to collab!
Awesome!
What it is like riding Bitcoin bubbles: an adventure through the present cryptocurrency explosion
Check out my latest article as well on why Bitcoin and cryptos are no where near bubble territory
Completely agree! Upvoted:-)
I think you'll find that most bubbles also occur where there's been a distortion in the market caused by easy credit.
Bitcoin's current run can easily be explained by supply and demand.
There's a limited supply and an increasing demand.
Maybe if you had a Central Bank offering free fiat money to go buy crypto, you might be able to artificially generate a bubble, just like all the other bubbles they've created.
So true it is completely misunderstood by most people! Jim Cramer is a smart man for being on the bitcoin train! My own brother thinks Bitcoin is a scam but I tell him not one person or government controlls the supply I tell him how people thought that the internet was a bad idea in the 80's to just how his thinking is.