Yale economics professor Robert Shiller won the Nobel prize for his work on bubbles. He wrote a seminal book on speculative manias, Irrational Exuberance, a deep analysis of the dramas over the centuries when otherwise sane people drove prices for tulips, stocks, and houses to inexplicable heights.
Quartz: What are the best examples now of irrational exuberance or speculative bubbles?
Shiller: The best example right now is bitcoin. And I think that has to do with the motivating quality of the bitcoin story. And I’ve seen it in my students at Yale. You start talking about bitcoin and they’re excited! And I think, what’s so exciting? You have to think like humanities people.
What is this bitcoin story?It starts with Satoshi Nakamoto—remember him? The mysterious figure who may or may not be real. He’s never been found. That has a nice mystery quality to it. And then he has this clever idea about encryption and blockchain and public ledgers, and somehow the idea is so powerful that governments can’t even stop it. You can’t regulate this. It kind of fits in with the angst of this time in history.
If you look at the third edition of Irrational Exuberance, I’m arguing that there’s a fundamental deep angst of our digitization and computers, that people wonder what their place is in this new world. What’s it going to be like in 10, 20, or 30 years, and will I have a job? Will I have anything?
Somehow bitcoin fits into that and it gives a sense of empowerment: I understand what’s happening! I can speculate and I can be rich from understanding this! That kind of is a solution to the fundamental angst.So I’m trying to deconstruct the bitcoin story. Big things happen if someone invents the right story and promulgates it.
So, is he right? Is Bitcoin really in a bubble? Or is it going to hit other obstacles that he mentions in the article.
A really good read about where we are from his perspective.
No. Cryptocurrencies are just undervalued and the market is correcting upwards.
I'm with you, @ashman. When I read the article he was asked what he thinks about ICOs. He stated he had no idea what an ICO is.
I do think there are parts of it that are in what look like a bubble. But, I think there are things about BTC and crypto that aren't fully understood by the markets or the academics because it looks a bit like a duck, it flies like an eagle, it swims like a dolphin. So, I don't think it's a duck.
No, Bitcoin will go up too. There is no bubble.
I sure hope you're right. I'm long bitcoin and not stopping anytime soon. Just bought some more at the dip this week.
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