The internet is replete with people referring to bitcoin as a “bubble.” They are spreading fear, uncertainty, and doubt galore. They believe bitcoin’s high price spells impending doom, but their criticisms move beyond mere skepticism. It seems like they just hate cryptocurrency. Yet many of these pundits do not fully grasp bitcoin…or even economics.
For anyone unfamiliar with what a bubble is, investopedia refers to it as an asset driven by unwarranted, but exuberant, market behavior. It is basically a hike in price that has resulted in a lie or “false truth” about the actual value of an asset, and therefore presages a massive selloff.
People are Confused About Bitcoin
Bitcoin is Not a Bubble
Commentators like Peter Schiff and others have routinely said bitcoin is a “bubble,” and that it will collapse any moment. They make these claims, but do not seem to understand how bitcoin works. Everyone sees headlines like this all over the internet: “Bitcoin is a false truth, warns analyst,” and this CNBC article, “Bitcoin’s nearly five-fold climb in 2017 looks very similar to tech bubble surge.” There is even a site dedicated to collecting these FUD and clickbait claims the mainstream media repeats.
In a recent Chicago Tribune op-ed article called “Why Investors Should be Wary of Bitcoin,” writer Gail MarksJarvis, also compared the bitcoin boom to various historical bubbles:
Do you remember the housing crash of 2008, when the innocents who bought homes thinking they’d make a fortune on soaring prices ended up losing 30 percent on plunging home values? Do you remember the technology stock bubble of early 2000? Until the technology bubble burst, people were euphoric about the pioneers of the fledgling Internet in the 1990s, and figured the gains in technology stocks would never end.
She went on to say that bitcoin is not special or different in this regard. She implied it is a “volatile bubble” that could burst at anytime and leave investors gasping for air. Her comparisons — and all comparisons mentioned — are erroneous, though. The currency is not comparable to any of the aforesaid history lessons.
Bitcoin is Special
Bitcoin is special. It is not a company that could lose profitability and fail. It is certainly not a speculative real estate scam that could crumble as a result of government and bank-induced chicanery. Bitcoin is another animal.
Bitcoin is Not a Bubble
Its value is not increasing because of marketplace lies. It is increasing because it is a life-changing financial invention. It is increasing because more people are adopting it. The “network effect” is in full swing.
It is true investors are rabid to get on board and this excitement is causing bitcoin’s price to explode, but do not confuse this with an artificially inflated bubble based on a “false truth.” In accordance with the network effect, the more people that continue to get involved with bitcoin, the higher the price will climb.
Bitcoin is also growing as a result of basic economics. The supply is limited to 21 million units and this necessarily makes bitcoin a scarce asset. When things are scarce and people want those things, their value will ultimately rise. Supply and demand at work.
Thus, when economics and the network effect intermingle, you have a recipe for explosive growth within an asset. Bitcoin is not some new version of the 17th century tulip bulb. It is a groundbreaking advancement in accounting and money.
Bubbles versus Technological Failures
With that said, this does not mean Bitcoin is guaranteed to succeed. The price could be affected if something bad were to happen to the protocol that underlies it. If this kind of event ever occurred, people would certainly lose faith in bitcoin and its price would collapse.
Bitcoin is Not a Bubble
However, this is not the same thing as an artificially hiked price or “bubble.” It is the result of a technological or community failure, but not a market failure. For instance, Bitcoin just upgraded to Segwit. However, Segwit does not necessarily align with Satoshi Nakamoto’s vision that Bitcoin should be a scalable, peer-2-peer cash system. Instead, it turns bitcoin into a settlement layer, which could do harm to the currency.
This illustration is not intended to spread panic. I am just saying bitcoin is susceptible to failures and crashes. It is just that these potential crashes are not the result of a “bubble.” They would occur because the community failed to make bitcoin economically viable. In either case, many people hope Segwit will work over the long run and that there will not be a technological failure.
Point being: if people want to call bitcoin a bubble, they ought to explain why exactly it is, instead of incompetently comparing it to past bubbles that do not share any characteristics with bitcoin other than a big price tag. If bitcoin were a bubble, it would be the largest one humankind has ever witnessed (not counting the 6,000-year old gold bubble, of course). But that is unlikely. It is more likely that bitcoin is just an amazing creation. Its value and potential dwarfs any fintech idea heretofore imagined, and the blockchain communities are just getting started.
Sep-12-2017 06:26:18 PM
Prices of bitcoin soared further into record territory Tuesday, briefly trading above $4,700, as demand for the cryptocurrency, perceived by investors as a safer assets than fiat currencies, jumped following North Korea’s missile test over Japan.
One bitcoin BTCUSD, +1.09% was up 4.3% to $4,628, bringing its market capitalization to $76.4 billion. Since the start of the month, bitcoin has gained more than 60% and it is up about 360% so far this year, according to Coindesk.com.
Prices of Ether, the blockchain currency trading on Ethereum platform, also rose sharply, up nearly 5% at $364.85. Its total value is at about $34.4 billion. Despite recent rally, Ether is still below its all-time high $383.58, reached in June. Year to date, Ether is up more than 4,000% thus far in 2017.
The total value of the digital-currency universe tracked by data research site Coinmarketcap.com, including those linked to the Bitcoin, Ethereum and Ripple blockchain networks, reached a fresh record at about $164 billion.
Bitcoin’s run-up is unlike any other asset, according to analyst at Bespoke Investment Group.
In the attached chart, Bespoke analysts compared the price of Bitcoin from 2015, with other assets that enjoyed parabolic, or bubblelike, rises since 1990.
Climbing prices of cryptocurrencies have been in part fueled by interest from ordinary people as well as major Wall Street investors, who are attracted to cybercurrencies running on decentralized blockchain platforms.
The blockchain is the digital ledger that tracks each bitcoin transaction and underpins the currency.
Read: Opinion: Stay away from bitcoin and Ethereum—they are complete garbage
Despite surging prices of bitcoin and other digital currencies, complaints against abuses are soaring as well.
The Consumer Financial Protection Bureau received 277 complaints about virtual currencies through August. In 2016, there were only seven, according to student loan marketplace LendEDU.
In the past, the regulator warned consumers that there may be potential issues with virtual currencies such as unclear costs, volatile exchange rates, the threat of hacking and scams.
Sep-2-2017 10:38:58 PM
While many fear BTC-USD is entering bubble territory, others are calling for even higher price targets. Politics aside, there is a clear push for higher BTC-USD prices and it’s creating market uncertainty.
Here are the facts:
30 days ago, BTC-USD was $1800.
Today the price of BTC-USD has risen 130% and has managed to establish an all time high at $4300.
In 5 days alone, the price of BTC-USD has increased its market value by 30%.
Taking a look at the macro trend since the rise post-$1800s, we see clear lines of support along the Fibonacci Retracements:
Across the length of the bullish push from the $2700s (the 61% line) there are signs of sustained momentum in the RSI and MACD. Looking at the volume profile, there is no clear decline in volume and it appears to show market interest in higher values as the volume’s moving average has remained mostly flat. However, since the bullish push from the $3200s (the 38% line) we can see signs of bullish exhaustion in the form MACD and RSI divergence.
Zooming in on a smaller timescale, we see evidence of a higher push to new all time highs:
At the top of BTC-USD’s strong run from the $3200s stands a classic bullish continuation pattern called a “Bull Pennant.” The pennant is characterized by price consolidation within a convergent pattern and has decreasing volume throughout the length of the pennant body. To accompany this pattern is a 1-hour RSI and MACD that began to consolidate toward its centerline.
At the time of this article, BTC-USD appears to have broken out of this pennant with a sharp increase in volume. Currently, based on typical price projections for Bull Pennant breakouts, this pennant breakout has a price target of $5000.
Although this is a rather aggressive price target for this bull pennant, there are some considerations on a macro scale that should be addressed and discussed.
For the fourth day in a row, BTC-USD continues to push outside the Bollinger Bands. Historically, this sort of push has led to market pullback or consolidation. Even on high timescales, the current 3-day candle (not shown above) is fully formed outside the Bollinger Bands and shows, on a macro scale, that the market is overbought. To accompany this push of the Bollinger Bands, a clear decrease in volume is seen on the moving average that shows, since the rise from $1800s, there has been waning bullish sentiment.
While there is a lot of hype surrounding BTC’s recent rise, it is paramount to remain objective and skeptical of market activity and to view the market soberly. The price target of $5000, on a micro level seems plausible. However, on a macro level the bullish market appears to have slightly bearish divergence. To remain a reliable price target, the market needs to see a push to newer all time highs accompanied by increase in volume to sustain the next $800 of price movement.
BTC-USD has broken out of a bullish continuation pattern called a “Bull Pennant” with a price target of $5,000.
On a macro scale, there are signs of bullish momentum loss in the form of bearish divergence and overbought signals on the Bollinger Bands.
While the market can remain overbought for days and weeks, it’s important to keep in mind that the higher the market pushes into overbought zones, the more necessary market consolidation becomes in order to prevent a market pullback. So far, there has yet to be any considerable market consolidation during this 130% rise.
Sep-2-2017 10:36:10 PM
Bitcoin could hit $100,000 in 10 years, says the analyst who correctly called its $2,000 price
11:14 AM ET Wed, 31 May 2017 | 01:02
Bitcoin's price has the potential to hit over $100,000 in 10 years, which would mark a 3,483 percent rise from its recent record high, an analyst who correctly predicted the cryptocurrency's rally this year told CNBC on Tuesday.
In December, Saxo Bank published its annual report called "Outrageous Predictions" with one of the forecasts calling for bitcoin to hit $2,000 in 2017. At the time the note was published, bitcoin was trading at around $754, so the target price represented a 165 percent rise. Bitcoin hit $2,000 on May 20.
But now, Kay Van-Petersen, the analyst behind the call, is looking long term and sees a big rise ahead for bitcoin.
How will bitcoin hit $100,000
Here's how he came up with his price target in 10 years.
Van-Petersen is assuming cryptocurrencies in general – not just bitcoin – will account for 10 percent of the average daily volumes (ADV) of fiat currency trade in 10 years. Foreign exchange ADV currently stands at just over $5 trillion, according to the Bank for International Settlements.
Ten percent of $5 trillion is $500 billion. This is the ADV that cryptocurrencies could have. Bitcoin will account for 35 percent of that market share, which would that $175 billion of the $500 billion figure, he said. This would mean that $175 billion worth of bitcoin would be traded every day.
Also, Van-Petersen then implies that bitcoin's market capitalization would be ten times the average daily volume, giving a figure of $1.75 trillion for the market cap. The current figure is around $37.8 billion, according to data from industry website CoinDesk.
Bitcoin has a limited supply of 21 million which is expected to be reached by the year 2140. In 10 years, the analyst thinks that there will be 17 million bitcoin in circulation, up from the current 16.3 million figure.
If the potential 17 million of bitcoins in supply is divided by the $1.75 trillion market cap estimate, then each bitcoin would be worth just over $100,000.
Van-Petersen – who owns bitcoin – emphasizes that this is a rough calculation but that his growth predictions could be "conservative" given that in the year 2013 alone, bitcoin's price grew over 5,000 percent. The analyst said that cryptocurrencies will survive in the long run.
"This is not a fad, cryptocurrencies are here to stay," Van-Petersen told CNBC in a phone interview.
"There will emerge two to three main ones. Bitcoin will be one of those. And the reason is the first-mover advantage, the scale and the pioneering."
Bitcoin surges 11% to all-time high above $2,700; Has now doubled in May
Van-Petersen's views are not the official view of Saxo Bank, the analyst said.
Bitcoin's bad reputation:
The bitcoin industry has had its fair share of problems and reputational damage. The digital currency has often had an image of being used for illegal means such as buying drugs online. The collapse of Mt.Gox in 2014, once the world's largest bitcoin exchange, is still fresh in the minds of users. Some members of the exchange are still waiting for compensation.
More recent issues include some exchanges not allowing people to withdraw their money in fiat currency. On top of this, the view of bitcoin as a currency for criminals is still prevalent after the major WannaCry ransomware cyberattack saw hackers lock peoples' files and ask for bitcoin in exchange to unlock them.
Still, Van-Petersen says that the industry is still extremely young and big improvements will come. A few factors will boost bitcoin adoption including better wallets, easier methods to buy the digital currency, use of it for money transfers in areas like remittances, as well as citizens of countries with volatile economies and currencies buying it.
"Volumes are going up, volatility is going down. A lot of people talk about the volatility, but if you are in Zimbabwe or Venezuela, this volatility is nothing. This is the interesting thing to me. I think in the West, a lot of people view it is as speculative, but emerging markets will get it, their needs will be different," Van-Petersen added.
While Van-Petersen is offering one way to value bitcoin in the future, others say that there are other factors to take into consideration.
"It's one way of slicing the pie to try and predict future prices which always relies on a lot of assumptions," Charlie Hayter, CEO of industry website CryptoCompare, told CNBC by email.
"Equating volumes to price value is one method of attempting a valuation, but it doesn't take into account the fundamentals of the ecosystem."
The fundamentals of what bitcoin is capable of from a technical point of view and how regulation is molded around its use will determine its value too, Hayter added.
Aug-19-2017 06:20:25 AM
Carrying this week’s upward momentum triggered by the scheduled activation of the Bitcoin Core development team’s scaling solution Segregated Witness (SegWit) and increase in demand from institutional investors towards bitcoin and rising adoption, bitcoin price established a new all-time high at $4,419 on August 15.
Upon establishing a new all-time high, the bitcoin price suffered a minor correction, dropping from $4.419 to $4,236. Still, on a 24-hour basis, bitcoin has recorded a 2 percent daily increase.
Many analysts including Standpoint stock researcher Ronnie Moas, who successfully predicted the recent surge of the bitcoin price to $4,000, noted that bitcoin has the potential to surpass the $7,500 mark before the year ends.
“What’s happening is the floodgates are opening. I believe there are hedge funds and very deep-pocketed individuals going into this now, really hundreds of millions of dollars. You can’t look at this as a normal situation. We’re in an industry that will probably go from $140 billion to $2 trillion and the bitcoin price will probably move with that,” said Moas.
Specifically, Moas emphasized the exponential rise in the involvement of institutional investors within the bitcoin and cryptocurrency markets, attributing such abrupt increase in demand as one of the driving factors of bitcoin’s recent rally. As key players in the finance sector including the Chicago Board Options Exchange (CBOE), the largest options exchange in the US, continue to establish necessary infrastructures for institutional and retail investors, the cryptocurrency market will grow in terms of market cap and daily trading volumes.
In a note to the clients and portfolio managers of Standpoint, Moas explained:
“I expect that within a couple of years we will have between 50 and 100 million cryptocurrency users — up from approximately ~10 million today. We only have 0.15% market penetration right now — if that goes to 2% or 3% we will get to the $50,000 price target that I set at the beginning of July.”
Previously, merely 12 months ago, the bitcoin and cryptocurrency exchange markets lacked overseas regulations, robust infrastructures and sufficient liquidity for large-scale traders. Today, leading bitcoin service providers including the $1.6 billion bitcoin startup Coinbase and US-based regulated bitcoin exchange Gemini are collaborating with institutions like CBOE to drastically increase liquidity for institutional and retail investors.
As large sums of investments and capital flow into the bitcoin exchange market in the upcoming months, upon the completion of CBOE’s bitcoin integration and increased adoption from investment banks, the value of bitcoin will likely rise at a substantial rate, as noted by Moas. In consideration of the rapidly rising demand from investors, Moas’ $7,500 price target is a realistic year-end objective for traders.
Earlier this year, respected financial analysts including RT’s Max Keiser and Tone Vays revealed their predictions, stating that bitcoin price will hit $5,000 before 2017 ends. Moas increased his $5,000 price target to $7,500 in consideration of bitcoin’s recent strong rally. The imminence of SegWit activation and the launch of a bitcoin options and futures trading platform by CBOE are two major events which investors and traders should keep an eye on throughout August. CBOE’s integration of bitcoin will significantly increase liquidity for large-scale bitcoin traders, which the Winklevoss twins are aiming for.
Tyler Winklevoss, the founder and CEO of Gemini, wrote:
“Gemini’s key concerns in the cryptocurrency ecosystem have always been security, compliance, and regulatory oversight. By working with the team at CBOE, we are helping to make bitcoin and other cryptocurrencies increasingly accessible to both retail and institutional investors.”
Aug-18-2017 06:32:57 AM
NECKER ISLAND, British Virgin Islands — When Roya Mahboob, 30, a serial entrepreneur from Afghanistan, began her startup, Women’s Annex, a platform for women to upload blogs and videos and be paid for views, the company found that paying the women didn’t empower them financially.
While by law Afghan women could have bank accounts, their families didn’t want them to. “For one woman, her husband always hit her and took all the money from her,” said Mahboob, who then learned about Bitcoin and decided to begin paying the women with it.
After that, the abused woman “saved [her] bitcoins and then later sold them off and got a lawyer to get her divorce,” said Mahboob, who, in 2013, was named one of Time’s 100 Most Influential People in the World.
Aug-1-2017 12:57:25 AM
Eleesa Dadiani owns and runs an art gallery in London's famous Cork Street. She was born in Georgia in the Caucasus and was "breastfed by gypsies".
But she is also a passionate believer in the power of Bitcoin and other digital currencies.
When we meet she is busy preparing for an exhibition of sculptures made from the exhausts of former Formula 1 racing cars.
One of these strange rib-cage-like creations made from the super-strong alloy inconel has been gold-plated and will sell for about £35,000.
"These are pieces of history," she tells me.
In a first for the tradition-bound art world of Cork Street, her international clientele will have the opportunity to pay using Bitcoin, the digital cryptocurrency underpinned by blockchain technology.
The gallery will also accept other cryptocurrencies such as Ethereum, Ethereum Classic, Dash, Litecoin, and soon, Monero, she says.
Find out more:
Jul-28-2017 04:44:07 AM