Bitcoin a bubble or not
The Internet was a great idea that convinced a lot of great minds to invest capital and energy into businesses that have transformed the world — Amazon, eBay, Cisco, PayPal … the list is very long though, in fairness, the list of non-survivors is even longer — but they are not here to remind us of their nonexistence. Rising stock prices of Internet companies also brought unscrupulous people out of the woodwork. What does a pizzeria know about the Internet or incubating start-up companies? Nobody knew or cared. Management cashed out on suckers who bought the pop in the stock price.
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Bitcoin a bubble or not
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Bitcoin: this is what a bubble looks like
The Internet was a great idea that convinced a lot of great minds to invest capital and energy into businesses that have transformed the world — Amazon, eBay, Cisco, PayPal … the list is very long though, in fairness, the list of non-survivors is even longer — but they are not here to remind us of their nonexistence.
Rising stock prices of Internet companies also brought unscrupulous people out of the woodwork. What does a pizzeria know about the Internet or incubating start-up companies? Nobody knew or cared. Management cashed out on suckers who bought the pop in the stock price. I have seen half a dozen stories like this over the last few weeks. Beanie Babies were released in a limited quantity the key word , and thus the price kept going up.
Predictably, that fad ended just like thousands of others — it went from hot to cold. I am not writing this just about Bitcoin — people are shelling out billions of dollars to own other coins, too. Also, the scarcity argument worked for Beanie Babies … until it did not.
At some point the number of people who want to cash in their gains exceeds the number of new suckers who want to buy in. Supply exceeds demand, the price declines, and just as price increases spawned more price increases on the way up, price declines snowball into further price declines — this is how a bubble bursts. In a month?
A year? In the tech meltdown melodrama of , billions of dollars were lost and some fraudsters went to jail probably too few. I predict that this episode is not going to be much different. About Bitcoin.
Paul made a very good point: Bitcoin as a technology is version 1. Future blockchain innovations will be much faster and much more efficient. Mining bitcoin consumes about the same amount of energy per year used by Bulgaria. Future ones will be better. And maybe that is why we have 1, other ones competing for the title of Bitcoin 2. A bubble is usually a good thing taken too far as I write this I still cannot grasp what is so great about Beanie Babies.
The Internet was an incredible invention, and it has transformed global economy. But first it brought us a bubble of enormous proportions … which painfully burst. That is what bubbles do. This coin bubble is going to inflate, and then it will follow the script.
Why am I spilling digital ink on Bitcoin and other coins? I know how this movie will end, and this knowledge brings a weight of responsibility. People will be hurt by this mania, and many of them will not be able to afford their losses. I have a feeling this is not an isolated story. I saw many people destroy their wealth during the dot-com bubble though at first their wealth tripled or quadrupled , and this time is unlikely to be any different.
Gambling especially playing the slot machines is not a rational endeavor if you look at it only from a financial perspective. The odds are clearly against you. Sign up here to get Katsenelson's latest articles in your inbox. Skip to header Skip to main content Skip to footer. Skip advert. Home investing. February 26, This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. About the Author.
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Bitcoin rally may be the 'mother of all bubbles' says BofA
You seem to forget the basic assumption of rational bubble theory: rg is not even close to serious. The above is not what I wrote. So let me restate more fully. Rational bubbles require r smaller than g. You describe irrational bubbles that occur when r greater than g. Bitcoin can certainly survive as a rational bubble that constitutes a declining fraction of wealth as long as there are other forms of wealth such as gold that yield r smaller than g.
The Bitcoin bubble
To cryptocurrency true believers, Bitcoin is the ultimate store of value, the most solid hedge against the rampant inflation manufactured by reckless central banks and their money-printing. Bitcoin has retreated sharply to start the new year. Credit: Getty. The digital token steadily gained a following, inspired a rash of wannabes and endured some wild rides. A bunch of that cash made its way to digital assets, turbocharging prices. For most of its year history, Bitcoin has enjoyed an environment of easy monetary policy and zero or negative rates. For one, the Fed buying any type of asset can have ripple effects and lift prices of other investments. Second, with rates at rock-bottom lows, investors have been forced to scour the market for higher-yielding opportunities and many turned to crypto given its ability to post outsize gains. Think of a junk-bond investor who was accustomed to high-single-digit returns even on bad days, said Tawil. So what happens when financial conditions become tighter?
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The market is filled with irrational exuberance when it comes to Bitcoin, and this could affect whether or not the cryptocurrency becomes a legitimate form of payment in the near future, says UNSW Business School's Elvira Sojli. When will the Bitcoin bubble burst? Several companies, including Tesla, recently announced plans to accept the cryptocurrency as a legitimate form of payment. Just last month, CarBuyers.
Bitcoin: Bubble or Anti-Bubble?
Bitcoin has been declared "dead" and a "bubble" for years — let's see what prices in Bitcoin's history made people think that the biggest crypto was on its way out. Join us in showcasing the cryptocurrency revolution, one newsletter at a time. And that one was, I thought, tremendously obvious. CoinMarketCap News. Table of Contents.
Bitcoin: behind the bubble, let's take a look at real debates
Diversification in institutional funds: There may be a place for bitcoin as a very small, volatility-weighted allocation in a long-term, institutional pension fund. A number of institutional fund managers have thus incor-porated bitcoin exposure into certain of their institu-tional funds. Regulatory warnings: US and UK financial regulators have recently issued clear warnings regarding retail investor investment in cryptocurrencies and related derivatives. A key argument made by Mr. De Vijlder is this:. When the fundamental value of an instru-ment like a cryptocurrency is very hard if not impossi-ble to determine and when short-term price changes are a multiple of those observed in equity markets, caution should prevail when building and managing an expo-sure. Online financial literature has been full of the pros and cons of cryptocurrencies in general, and specifically Bitcoin in recent months. Rarely have we seen such trenchant, bitterly divided views on a financial instrument.
The widespread adoption of blockchain technology could be good news for the internet and its users. O ne would need to have the attention span of a newt to be surprised by what has happened — and is still happening — with bitcoin, the so-called cryptocurrency. Non-newts are immediately reminded of the tulip mania that swept the Netherlands in the s. At the peak of that bubble, in February , a single bulb was selling for 10 times the average annual income of a skilled craftsworker.
The last few weeks have been complicated for the bitcoin, the virtual currency created in by an anonymous programmer under the pseudonym of Satoshi Nakamoto. The key feature of this currency is its peer-to-peer payment system user to user, without intermediaries based on open source software administered by a community of volunteers. There is no central authority or central bank managing the system and no-one owns it. Its acceptance as a means of payment ultimately depends on the confidence generated by the currency.
Noelle Acheson. Damanick Dantes. To think that such a festive concept, one that evokes both sophistication and childlike wonder, could become so financially charged. It could also be described as [an asset that trades] at a price or price range that strongly exceeds the asset's intrinsic value. Do you see the common thread? An asset is in a bubble when its price increase is unrelated to its intrinsic or fundamental value. Nobody yet knows.
One of my most successful tips has been shorting bitcoin. So is this surge due to a genuine shift in the fundamentals? Or will history repeat itself? Many people clearly believe there have been two major changes in the fundamentals of the currency justifying not only the higher price but also further sharp appreciation.