A lot of people say, that the bitcoin bubble is about to burst.
Well, when does it burst and why?
In order to find a proper answer to that question, we must first analyze their logic.
First of all, they have the assumption that bitcoin is currently in bubble territory. Bitcoin increases in price quickly. Therefore, it must be in a 'bubble'. By their logic, anything that increased quickly including the world economy and the US is a bubble. Recall ~99% of the world’s wealth was created in the last two centuries out of a million years of human history.
If that were true, then Bitcoin is the better bubble to be in, if all massive bubbles are going to burst. Not to mention, gold is also a “bubble” that has subsisted for thousands of years. Bitcoin is partly digital gold, partly an evolving payment network. I doubt Bitcoin will go to zero in the short term, but I guess I could be wrong.
If you look at bitcoin purely as a transaction system, one could wonder why anyone would believe a system that can only process 7 transactions per second globally because of an artificial limitation over which people have been debating for years already would even get this popular. From this perspective, you could say bitcoin is far in a bubble and may burst any time.
If you look at bitcoin as a store of value with high transaction costs, just like physical gold, things look quiet different. Unlike physical gold, bitcoin is digital and can therefore very easily move around the world. For centuries, people have accepted the high transaction costs for gold and use it for specific cases, not for day-to-day expenses. From this perspective, you could argue that the current price of bitcoin isn’t even near the top.
Another way to look at bitcoin is as a hedge against all kind of trouble people perceive in the world, like Brexit, Trump, populists in European politics. In the past we have seen price going up in exceptional situations, like the Greek haircut or signs of trouble in Spanish or Italian banks. Some spikes can easily be traced to other political or economical situations. From this perspective, you could speculate any direction for the price, but I’d say probably a little upwards.
To keep it short, immense growth can be normal, but huge price drops must be expected and accepted.
' Some of you are wondering "why are cryptos crashing like crazy?"
Yet you didn't ask "why are cryptos climbing like crazy?"
That's why'
#Stop The Panic.
Interesting thoughts