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Truthful News for Cryptocurrency

Your honest source for all things blockchain and cryptocurrency

The truth about the bitcoin bubble

It’s a term used by banks, media, and government agencies all to often. We can see it almost daily in the headlines.

Bitcoin is a bubble and its going to pop. According to bank of America, bitcoin the greatest bubble in history and it’s already popping.

So what is a bubble? According to investopedia:

A bubble is 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.

They also state:

Bubbles form in economies, securities, stock markets and business sectors because of a change in investor behavior.

So what does all this really mean?

What it means is that the term bubble has no true meaning, but rather has become a term that is used to spread fear to investors in an attempt to get them to stop investing in a given asset or market.

It also means that according to the definition of investopedia, Bank of America is not at all correct, this actually isn’t the greatest bubble in history.

The greatest bubble in history would likely be the Wall Street Crash of 1929 which took place between October 24, 1929 and October 29, 1929.

Although not often associated with being a bubble for obvious reasons, this was the largest bubble pop in history that entered into a 12 year era known as the great depression and affected every western industrial civilization.

Not only did Wall Street have a bubble that popped in 1929, it has had over a dozen more bubbles expand and pop sense that date.

A bubble more often quoted and compared to bitcoin, is the dot-com bubble. Still another that gave the rise to the birth of bitcoin was known as the housing bubble of 2008.

There is, however, a funny thing about economic bubbles that very few talk about. After the bubble pops, the market continues on.

Despite having over a dozen stock market bubbles having come and gone, the stock market is still here. If it were not, all modern investing as we know it would have ceased to exist long ago.

Equally despite having a dot-com bubble, the dot-com is still here. Companies are thriving using the world-wide web, and the cornerstone of the web is a good dot-com domain name.

Sure, some companies ceased to exist during the collapse of the stock market in 1929, other companies fell at other times during wall street bubble such as Enron in 2001.

There were also some companies that ceased to exist when the dot-com bubble popped while other companies continued to stand the test of time.

Most people are still living in houses or renting apartments, so it’s very clear that the pop of the housing bubble did not eliminating housing for the western world.

The reason I am sharing all this is to show you that the claim of the bitcoin bubble, is not actually false, but the only reason to make the claim, is to scare people away from using bitcoin.

Sure bitcoin may be in a bubble. That bubble will very likely pop because that’s what bubbles do. Also just like historically happens, that bubble will grow again, and pop again and grow again and pop again, just like investments do, just like currencies do, just like the stock market does, just like interest rates do, and just like the housing market does.

It is very much an inevitable fact. This is how growth happens in modern economics and marketplaces. At some point in the future we can also expect the technology industry as a whole will collapse and that will also be a bubble popping.

Just because the term bubble is used to describe bitcoin, doesn’t mean the price will not rise again. It very likely will. Unlike a ponzi scheme that when it collapses there is no more money in it and so a company ceases to exist, the same is not true when dealing with currency.

There will always be people who continue to hold that currency, and who find others to buy it from them at a greater price. So no matter how far the price of bitcoin actually falls, it will always bounce back.

This is largely due to the fact so many people believe in bitcoin as a new form of money. We saw this happen with bitcoin at the time of the Mt GoX collapse. Countless people were scared away from bitcoin for a few years. But many people grew to love the idea and concept and they kept it going and rebuilt the following and made it twice as strong.

At this point, we can certainly say we have seen a bitcoin bubble pop between December of 2017 and April of 2018, and it may continue to pop, however it will once again bounce back, because there are still people who believe in the core ideology of what bitcoin is and what bitcoin stands for. No matter how low it goes, these people will just start rebuilding the value back up again.

Each time it pops, the amount lost will get larger and larger, because each time the amount of people brought in will get larger and larger. However each time it pops it will also be at a greater value than the last time it popped.

These are facts in the way economic growth bubbles work. So don’t be afraid of bitcoin or it losing value. That’s going to happen over and over. That’s what happens when you have a currency that is based on market supply and demand instead of never-ending falling value such as fiat currency has.

However rest assured, each time it falls, more and more people stay involved and help rebuild it back up. Whether you chose to bail on bitcoin or stick with it, the truth is whether it’s this year or in a few years from now, bitcoin will once again be the talk of the financial world.

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