If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). They seem to be good at predicting things with known variables, but not with unknown unknowns.
I'm making a contrarian bet that experts are wrong this time as well (at least in the near term). People are jumping the gun, trying to look smart and predict the right outcome. The same people that never predicted bitcoin would be this popular. If I'm wrong, so be it, I'll lose a few % of my net wealth.
>If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit).
Be very careful with those conclusions. In both cases the predictions were that the elections were very close. Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all.
> If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong
But most of the time, they are in fact right. I don't know why a couple instances of wrong-ness proves that experts are unreliable. Other than selection/confirmation bias.
It's somewhat mythical that the "experts" got Trump and Brexit completely wrong. Fivethirtyeight, the most-famous among the poll aggregators, had Trump at 25% in their last prediction, for example.
That's not perfect, but they have literally written hundreds of articles trying to tell everyone that their predictions are just that, predictions. They also have an analysis showing that the polls were more accurate than in previous elections. That's not very helpful when +-0.5% can make all of the difference, but I'd expect HN of all places to have some appreciation for the concept of probabilities and uncertainty.
What's more important is that the experts got almost everything right in regard to, for example, the UK/EU negotiations. Which is why you can currently earn more money selling "Told you so!" t-shirts in Brussels than investing in Bitcoin.
But ultimately "is bitcoin a bubble?" isn't a popularity contest–it's a question of fact. It's the same as "is their any underlying value that makes a bitcoin worth $20,000?".
I'd argue the answer is almost certainly nope, because bitcoin has failed spectacularly at the mission it initially set out on. It is useless for transactions, as shown by $20 fees. It's far less secure than cash under your mattress. And it's not anonymous to any reasonable degree.
Basically all of bitcoin in active circulation is held for speculation, which sets it apart from other currencies. The only analogue is gold, and one could reasonably say that gold is in as much of a bubble as bitcoin. The only question remaining is if bitcoin can pull of becoming the second bubble-that-doesn't-pop.
It's not impossible. But my guess is the bubble pops as soon as BC stops being in the evening news every day. Take away the FOMO, and people will prefer a store of value they can touch.
> They seem to be good at predicting things with known variables, but not with unknown unknowns.
Exactly. 96% consensus on a guess is just as good as 99% or a 1%. It doesn't matter how many experts agree if they base their decision on unreliable information.
Bitcoin might indeed be a bubble. But what about cryptocurrencies in general? I think that even these economist wouldn't be so sure if they'd been asked a broader question without pinpointing bitcoin.
it's not really a contrarian bet. If you follow stock bubbles, you'll know that stocks rise on a wall of worry, and fall on a slope of hope. Basically, when everyone is worried about it being a bubble, there's probably still room to grow. The time you gotta watch out is when everyone starts thinking bitcoin is going to keep going up.
Vitalik thinks it's overvalued compared to what it can do today, but that just means the market is confident that it will be able to do much more later.
Bubble concerns worth listening to on crypto usually talk about the price getting to far ahead of the tech, network congestion, tx volume, scaling solutions, hard and soft forks, governance challenges, and regulatory uncertainty.
Bubble concerns not worth listening to talk about lack of transparency, the fact that not backed by anything, hacks, and of course tulips.
Since I can't view the WSJ Economist Survey crosstabs and filter on valid opinion vs hot take, I feel safe ignoring this result. While they're probably right, they're also probably right for the wrong reasons.
"Experts" predicting bitcoin's impending doom is nothing new. Does anyone remember Professor Mark Williams, a top economist who is so well regarded that he has been called to testify before Congress many times? In late 2013, he predicted that bitcoin would crash from $1200 to under $10 within the next 6 months [1]. After he was proven wrong, he revised his claim to say that the crash would happen eventually. I guess he was smart not to attach another date to his prediction, lest he be humiliated a second time.
Until these economists are willing to put testable specifics to their predictions (bitcoin will drop to under $X within Y weeks), or are at least taking short positions to back up their beliefs, no one should take them too seriously.
In contrast, the Winklevoss Twins correctly predicted Bitcoin's rise and become Bitcoin billionaires in the process. But they're not selling because they think it will go up much further [2]. Unlike the economists here, the Winklevii are putting their money where their mouths are.
This is true of every bubble ever. No one knew how to predict when the real estate bubble was going to collapse. And they wouldn't have been able to make any specific predictions, despite real estate being an obvious bubble.
It was very easy to see that the price did not reflect the fundamentals. And Bitcoin is similar. The fundamentals of Bitcoin do not support the price.
Also in terms of putting your money where your mouth is, there isn't any reliable way to profit off of bubble's unless you know the timing. And that's very hard. There are no laws of the universe that keep Bitcoin from rising for another 12 years, or tripling in value before it crashes.
The gist of it is, is that if you look at the nature of the investor today, it is clear that this has become a giant speculative bubble. Investors do not understand what they are investing in. They are not sophisticated. They are not analyzing their investments. They are investing on the 'greater fool' theory.
All of the above does not preclude the possibility that Bitcoin survives, is useful, and perhaps is even still long-term undervalued despite the current bubble-aspects. But the nature of the investor today means that the dynamics of the price today are currently being driven by bubble-like factors, and are almost certain to have a large (50-90+%) drop at some point.
If you read crypto twitter, you will see that even the devs like Vitalik [0] and Vlad [1] are extremely wary of how much the price has risen given the level of development of the technology thus far.
I'm committing the cardinal sin of commenting before I'm done with the article, but whenever this discussion comes up, I feel like asking: why not both? Could it be that Bitcoin is currently overvalued and in a "bubble", but it or something like it still may have huge value and utility in the long run? The idea that the Bitcoin bubble is something more like the Dot Com bubble than Tulipomania seems plausible to me.
Yes. Internet stocks were in a bubble in the late 90's. It burst but the Internet turned out just fine. The question is, when the crypto bubble bursts, will Bitcoin recover, or will it be something else?
Long term, the price has increased exponentially. As expected. There have been a few bubbles, as well. And it's pretty clear, as you say, that it's currently in one now.
Everyone that I've talked to seems to be aware of the (seemingly) inevitable price drop, but that doesn't seem to be stopping them from buying in. Most people just assume they'll be able to sell what they have when the price drops before all the 'dumb' people have a chance to do the same.
They just assume they'll be the lucky ones. I don't think everyone can be the lucky ones though.
I think after this all calms down and a reasonable price is reached it'll be a bit safer to use as an actual currency. Pretty sure we were all saying that when bitcoin was around $200 though so maybe it won't ever settle.
One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.
It’s next to impossible to say who’s doing the buying. With regulated financial instruments like ETFs or mutual funds there’s a concept of inflows and outflows where fiat cash changes hands.
With Bitcoin exchanges a trade could be new money, formerly sitting as cash in a bank account, could be a miner converting his other currencies to BTC, could be a dude trading with himself with two accounts on the same exchange.
We have no clear indication of actual new money coming into the ecosystem.
I've always wondered this. Even if you have $10k USD worth of BTC, you still need to find someone to buy it? What if you wanted to cash out $100k or $500k? At that point you need legal contracts, escrows, 3rd party verification, etc..
It's obviously a bubble, just stop and think about it for a moment. P2P payments over the internet clearly have some utility, but the quantity of bitcoins owned has no relationship to its utility, thus, the incredible rise in price can be attributed almost entirely to speculation. The masses don't care about P2P payments (at least not as far as that concept might relate to cryptocurrency), they are engaged in a FOMO reaction to constant hype and the false narrative that bitcoin is going to be the future of money. It's not as if all these new bitcoin buyers are going to engage in some kind of novel economic activity or wealth creation, they are just going to hodl till they're ready to cash out. Certainly, it is clear that bitcoin's rise in price does not track with any sort of uptick in commercial activity by the masses... really, every sign points to a bubble.
I've seen a few estimates for what value Bitcoin would have if it did become a world currency (or suchlike), and they're all in the $500 000+ range. So the current price of around $20 000 is consistent with the theory that Bitcoin will succeed with probability 5% and go to zero with probability 95%. I don't think that's obviously wrong, so I'd say it's wrong to call it a bubble.
And even if Bitcoin does go to zero that still doesn't prove that we were in a bubble now. The market is already 95% sure that that's what's going to happen!
You cherry-picked one poor prediction from a single (shoddy) economist and somehow conclude that economists in aggregate are terrible at predictions.
That statement doesn’t even logically support a conclusion that Sean is terrible at predictions. It’s also entirely possible that Sean errs on the side of optimism given his 2007 prediction, in which case his alarmism over Bitcoin shouldn’t be immediately dismissed.
It's completely possible for Bitcoin to be in a speculative bubble but also not overvalued.
I'm somewhat bullish on Bitcoin, but there's no doubt that there's a speculative bubble -- people with no knowledge of Bitcoin other than its price history are getting more and more eager to invest to ride the wave. This is the definition of a speculative bubble.
The main question is what side of the bubble we're on -- where are we relative to the point where Bitcoin has passed its fundamentals.
So one of the items that keeps coming back to awareness is the potential implications of the Tether fraud. For those few that haven't heard of this by now, Bitfinex is tied closely structurally (in terms of management and ownership) to the company that created Tether, the altcoin that claims to be backed in a 1:1 basis with a USD.
Well, there've been mysterious USDT transactions, in regular intervals, that suggest that there's tens of millions of Tether being pumped into Bitfinex on a regular basis, which of course can be converted into BTC (and other coins). However, no one thinks it's likely due to the soured reputation of Bitfinex (their big hack, their inability to do business with a U.S. bank, among other things) that this is REAL USD being pumped into this suspicious company with ill-reputed owners. This has been mentioned on Bloomberg and other mainstream publications.
So (if this is all true) what in the world will it mean reputationally that people have been pouring 800M of counterfeit coins into Bitcoin, and what does it mean economically?
Well, we still have that apocalyptic "derivatives bubble" hanging over our heads, which is estimated to be around $1.5-2 quadrillion (with a q). I don't think Bitcoin is competing in the same league.
The author of that tweet (a researcher at a pension fund) polled his followers several times about whether they thought BTC was a bubble. The higher BTC's price, the fewer people believed it was a bubble.
In the end Bitcoin is so similar to Gold. It is a means of storing wealth and is valued on a shared belief of finite quantities and that it is an effective/secure means of storing wealth.
It is hard for me to call a shared belief a bubble, because there is a clear understanding I think now that there is no underlying fundamental asset value.
Gold has a floor value though, sure it has a value above that based on being used as a store of wealth but the whole thing is predicated on the fact that gold is actually useful and has thousands of years of human history of being valued.
I'll disagree. Gold once mined will be there for us forever. Bitcoin once mined will need us to perpetually mine it to exist.
Gold will survive a nuclear war. EMP blasts, Hard drive failures, viruses, quantum computing and the lack of an internet connection aren't real risks to gold.
In the throws of WWIII, with buildings burning to the ground off in the distance, as you cross the border to mexico with just the clothes on your back, which would you rather line the seams of your jacket with: gold? Or a piece of paper with some numbers that unlocked your 'virtual currency'?
Let's see how well that shared belief holds up then.
I don't think Bitcoin is like gold at all because I don't think there is a common belief that "it is an effective/secure means of storing wealth."
A small number of people think that now because Bitcoin is in a huge run up. If bitcoin crashes 90%, it suddenly stops being a "secure means of storing wealth" and, instead, is a means of throwing away your wealth.
If the market psychology changes, bitcoin becomes worthless.
Gold has the same problem, but has a huge historical record of actually being somewhat stable. And there is a price floor for practice demand of gold, though I'm not sure what that is.
How would someone classify Bitcoin’s rise from $0.08 to $31 from 2010 to 2011 before dropping to $2 or its rise from around $100 to around $1200 and subsequent crash to around $200 from 2013 to 2015?
I would say losing 85% to 95% of its value in a relatively short period of time after a large run up could be considered a bubble bursting. The thing that is interesting is that each time this has happened with Bitcoin the price settled somewhere ABOVE where it was before the last bubble.
I do think Bitcoin is in a bubble right now, but I think it could go much higher (maybe $50-100k?) before crashing, and I think the price after the crash will not go below $5k or $10k. The current wave began around $1000.
So what I think we are seeing is actually mass adoption of a new technology in waves that are increasing exponentially.
There has never been anything like Bitcoin so it is difficult to use lenses of Bubbles in the past to explain what is happening with it.
I really don't think cryptocurrency in general is a going anywhere; I don't think this is even the tip of the iceberg in terms of where this is going to lead. There are reason however, why bitcoin specifically might bubble and collapse. The main issue being the fact that at the moment its not reasonable to use bitcoin as if it were money, with the prime cause (in my eyes) being the cost of transactions. I do think bitcoin will collapse (not any time soon), but I think the contents of that bubble will find themselves in other, technically more useful cryptos. Not being able to move bitcoin around with out these ridiculous transaction fees is why bitcoin will eventually collapse. Its not (as) useful as a store of value in its current form than a store of value that doesn't have acost for its use.
I'm curious how much of an understanding of coding and computer science gives you an edge here in terms of making money. It's weird seeing people on the news talking about different cryptocurrencies when they obviously don't understand the technical merits of each. For example, Litecoin and Bitcon differ by the block mining times and the hash function used and Ethereum allows more complex smart contracts etc. but these kinds of details aren't mentioned. Bitcoin seems to be facing scalability issues (in terms of the protocol and the community) but I'd be very surprised if the news picked this up.
Many economists also say that the current economic state may be a bubble, an even worse than that one that popped in 2008.
I think, Bitcoin is undervalued because it can provide a way out for unstable currencies (Venezuela, some African and Asian countries, maybe soon western countries) or to avoid regulations (China, Russia) and of course, for unlawful business (money laundry, blackhats, drugs). That's probably the real value drivers at the moment.
The biggest risk is regulation. Exchanges have to operate somewhere. But I guess, its hard to regulate something that is global (looking at you tax heavens).
[+] [-] AznHisoka|8 years ago|reply
I'm making a contrarian bet that experts are wrong this time as well (at least in the near term). People are jumping the gun, trying to look smart and predict the right outcome. The same people that never predicted bitcoin would be this popular. If I'm wrong, so be it, I'll lose a few % of my net wealth.
[+] [-] pedrocr|8 years ago|reply
Be very careful with those conclusions. In both cases the predictions were that the elections were very close. Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all.
[+] [-] 0xfeba|8 years ago|reply
But most of the time, they are in fact right. I don't know why a couple instances of wrong-ness proves that experts are unreliable. Other than selection/confirmation bias.
[+] [-] matt4077|8 years ago|reply
That's not perfect, but they have literally written hundreds of articles trying to tell everyone that their predictions are just that, predictions. They also have an analysis showing that the polls were more accurate than in previous elections. That's not very helpful when +-0.5% can make all of the difference, but I'd expect HN of all places to have some appreciation for the concept of probabilities and uncertainty.
What's more important is that the experts got almost everything right in regard to, for example, the UK/EU negotiations. Which is why you can currently earn more money selling "Told you so!" t-shirts in Brussels than investing in Bitcoin.
But ultimately "is bitcoin a bubble?" isn't a popularity contest–it's a question of fact. It's the same as "is their any underlying value that makes a bitcoin worth $20,000?".
I'd argue the answer is almost certainly nope, because bitcoin has failed spectacularly at the mission it initially set out on. It is useless for transactions, as shown by $20 fees. It's far less secure than cash under your mattress. And it's not anonymous to any reasonable degree.
Basically all of bitcoin in active circulation is held for speculation, which sets it apart from other currencies. The only analogue is gold, and one could reasonably say that gold is in as much of a bubble as bitcoin. The only question remaining is if bitcoin can pull of becoming the second bubble-that-doesn't-pop.
It's not impossible. But my guess is the bubble pops as soon as BC stops being in the evening news every day. Take away the FOMO, and people will prefer a store of value they can touch.
[+] [-] pep_guardiola|8 years ago|reply
[+] [-] Evgeniuz|8 years ago|reply
Exactly. 96% consensus on a guess is just as good as 99% or a 1%. It doesn't matter how many experts agree if they base their decision on unreliable information.
[+] [-] camillomiller|8 years ago|reply
[+] [-] sixQuarks|8 years ago|reply
[+] [-] sasas|8 years ago|reply
https://www.samharris.org/podcast/full_archive
[+] [-] billmalarky|8 years ago|reply
Vitalik Buterin (Ethereum): https://mobile.twitter.com/VitalikButerin/status/94085013791...
Charlie Lee (Litecoin): https://twitter.com/SatoshiLite/status/940353265585160192
I've been bullish on crypto past few years but it's gone too far. I've flipped to bear until the tech catches up.
[+] [-] placeybordeaux|8 years ago|reply
Micropayments aren't possible on any widely accepted coin. BTC has hit 20 USD a tx (albeit without segwit).
It's looking a little rough.
Might be time for a draw back.
EDIT: I was pulling together the avg tx fees from https://bitinfocharts.com/
$BTC: 24.4 USD $ETH: 1.07 USD $BCH: 0.17 USD $LTC: 0.632 USD $DASH: 0.62 USD $XMR: 5.49 USD
My other thoughts on the subject: https://twitter.com/placeybordeaux/status/941122240623423490
[+] [-] DennisP|8 years ago|reply
[+] [-] colorincorrect|8 years ago|reply
[+] [-] hectorr1|8 years ago|reply
Bubble concerns not worth listening to talk about lack of transparency, the fact that not backed by anything, hacks, and of course tulips.
Since I can't view the WSJ Economist Survey crosstabs and filter on valid opinion vs hot take, I feel safe ignoring this result. While they're probably right, they're also probably right for the wrong reasons.
[+] [-] Meekro|8 years ago|reply
Until these economists are willing to put testable specifics to their predictions (bitcoin will drop to under $X within Y weeks), or are at least taking short positions to back up their beliefs, no one should take them too seriously.
In contrast, the Winklevoss Twins correctly predicted Bitcoin's rise and become Bitcoin billionaires in the process. But they're not selling because they think it will go up much further [2]. Unlike the economists here, the Winklevii are putting their money where their mouths are.
Time will tell if they're right.
[1] http://www.businessinsider.com/williams-bitcoin-meltdown-10-...
[2] http://www.businessinsider.com/bitcoin-winklevoss-twins-say-...
[+] [-] JamesBarney|8 years ago|reply
It was very easy to see that the price did not reflect the fundamentals. And Bitcoin is similar. The fundamentals of Bitcoin do not support the price.
Also in terms of putting your money where your mouth is, there isn't any reliable way to profit off of bubble's unless you know the timing. And that's very hard. There are no laws of the universe that keep Bitcoin from rising for another 12 years, or tripling in value before it crashes.
[+] [-] berberous|8 years ago|reply
https://www.facebook.com/raydalio/videos/401164293638585/
The gist of it is, is that if you look at the nature of the investor today, it is clear that this has become a giant speculative bubble. Investors do not understand what they are investing in. They are not sophisticated. They are not analyzing their investments. They are investing on the 'greater fool' theory.
All of the above does not preclude the possibility that Bitcoin survives, is useful, and perhaps is even still long-term undervalued despite the current bubble-aspects. But the nature of the investor today means that the dynamics of the price today are currently being driven by bubble-like factors, and are almost certain to have a large (50-90+%) drop at some point.
If you read crypto twitter, you will see that even the devs like Vitalik [0] and Vlad [1] are extremely wary of how much the price has risen given the level of development of the technology thus far.
[0] https://mobile.twitter.com/VitalikButerin/status/94085013791...
[1] https://twitter.com/VladZamfir/status/941220330294644736
[+] [-] evanwise|8 years ago|reply
[+] [-] dumbfounder|8 years ago|reply
[+] [-] mirimir|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] Akujin|8 years ago|reply
Stop comparing Bitcoin to flowers. It's not even close to the same thing.
[+] [-] kiddico|8 years ago|reply
They just assume they'll be the lucky ones. I don't think everyone can be the lucky ones though.
I think after this all calms down and a reasonable price is reached it'll be a bit safer to use as an actual currency. Pretty sure we were all saying that when bitcoin was around $200 though so maybe it won't ever settle.
[+] [-] jandrese|8 years ago|reply
One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.
[+] [-] prostoalex|8 years ago|reply
With Bitcoin exchanges a trade could be new money, formerly sitting as cash in a bank account, could be a miner converting his other currencies to BTC, could be a dude trading with himself with two accounts on the same exchange.
We have no clear indication of actual new money coming into the ecosystem.
[+] [-] rubenrails|8 years ago|reply
Have you had similar problems selling bitcoin?
EDIT: saw -> see
[+] [-] djsumdog|8 years ago|reply
[+] [-] chomp|8 years ago|reply
Now I have ~$2300 locked up in the mempool, and no end in sight for these high transaction fees. Can't figure out a way to raise the fee.
https://jochen-hoenicke.de/queue/#4d
[+] [-] root_axis|8 years ago|reply
[+] [-] OscarCunningham|8 years ago|reply
And even if Bitcoin does go to zero that still doesn't prove that we were in a bubble now. The market is already 95% sure that that's what's going to happen!
[+] [-] rhino369|8 years ago|reply
[+] [-] porter|8 years ago|reply
Back in 2007 I watched his presentation in person where he said the U.S. would experience a "soft landing" and nothing major.
A few months later the stock market crashed 60%.
Economists are terrible at predictions.
[+] [-] slyfocks|8 years ago|reply
That statement doesn’t even logically support a conclusion that Sean is terrible at predictions. It’s also entirely possible that Sean errs on the side of optimism given his 2007 prediction, in which case his alarmism over Bitcoin shouldn’t be immediately dismissed.
[+] [-] andrewla|8 years ago|reply
I'm somewhat bullish on Bitcoin, but there's no doubt that there's a speculative bubble -- people with no knowledge of Bitcoin other than its price history are getting more and more eager to invest to ride the wave. This is the definition of a speculative bubble.
The main question is what side of the bubble we're on -- where are we relative to the point where Bitcoin has passed its fundamentals.
[+] [-] mancerayder|8 years ago|reply
Well, there've been mysterious USDT transactions, in regular intervals, that suggest that there's tens of millions of Tether being pumped into Bitfinex on a regular basis, which of course can be converted into BTC (and other coins). However, no one thinks it's likely due to the soured reputation of Bitfinex (their big hack, their inability to do business with a U.S. bank, among other things) that this is REAL USD being pumped into this suspicious company with ill-reputed owners. This has been mentioned on Bloomberg and other mainstream publications.
So (if this is all true) what in the world will it mean reputationally that people have been pouring 800M of counterfeit coins into Bitcoin, and what does it mean economically?
I can't wrap my head around that second question.
[edit: updated last sentence of p2 for clarity)
[+] [-] tedeh|8 years ago|reply
[+] [-] excalibur|8 years ago|reply
[+] [-] lpolovets|8 years ago|reply
The author of that tweet (a researcher at a pension fund) polled his followers several times about whether they thought BTC was a bubble. The higher BTC's price, the fewer people believed it was a bubble.
[+] [-] bhouston|8 years ago|reply
It is hard for me to call a shared belief a bubble, because there is a clear understanding I think now that there is no underlying fundamental asset value.
[+] [-] zimablue|8 years ago|reply
[+] [-] scottnyc|8 years ago|reply
Gold will survive a nuclear war. EMP blasts, Hard drive failures, viruses, quantum computing and the lack of an internet connection aren't real risks to gold.
In the throws of WWIII, with buildings burning to the ground off in the distance, as you cross the border to mexico with just the clothes on your back, which would you rather line the seams of your jacket with: gold? Or a piece of paper with some numbers that unlocked your 'virtual currency'?
Let's see how well that shared belief holds up then.
[+] [-] krrrh|8 years ago|reply
[+] [-] rhino369|8 years ago|reply
A small number of people think that now because Bitcoin is in a huge run up. If bitcoin crashes 90%, it suddenly stops being a "secure means of storing wealth" and, instead, is a means of throwing away your wealth.
If the market psychology changes, bitcoin becomes worthless.
Gold has the same problem, but has a huge historical record of actually being somewhat stable. And there is a price floor for practice demand of gold, though I'm not sure what that is.
[+] [-] zerostar07|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] craigc|8 years ago|reply
I would say losing 85% to 95% of its value in a relatively short period of time after a large run up could be considered a bubble bursting. The thing that is interesting is that each time this has happened with Bitcoin the price settled somewhere ABOVE where it was before the last bubble.
I do think Bitcoin is in a bubble right now, but I think it could go much higher (maybe $50-100k?) before crashing, and I think the price after the crash will not go below $5k or $10k. The current wave began around $1000.
So what I think we are seeing is actually mass adoption of a new technology in waves that are increasing exponentially.
There has never been anything like Bitcoin so it is difficult to use lenses of Bubbles in the past to explain what is happening with it.
[+] [-] RosanaAnaDana|8 years ago|reply
[+] [-] jrimbault|8 years ago|reply
[+] [-] seanwilson|8 years ago|reply
[+] [-] einrealist|8 years ago|reply
I think, Bitcoin is undervalued because it can provide a way out for unstable currencies (Venezuela, some African and Asian countries, maybe soon western countries) or to avoid regulations (China, Russia) and of course, for unlawful business (money laundry, blackhats, drugs). That's probably the real value drivers at the moment.
The biggest risk is regulation. Exchanges have to operate somewhere. But I guess, its hard to regulate something that is global (looking at you tax heavens).