Topic: Is Bitcoin A Bubble? Why many people are looking at this through the wrong lens (Read 2112 times)

I'll give you an example of how analysts and the media stranglehold over information can contribute towards denial of economic fact.

There were indications was early as 2005 that the 2008 economic crisis was coming. In the following clip you can see how the media used its power to deny the evidence ensuring the public would follow the "no one could have predicted this disaster" denialist campaign.

https://www.youtube.com/watch?v=HQ79Pt2GNJo

Officially there was only 24 hours warning for the 2008 economic crisis, despite this example of there being evidence years in advance.

Some have the idea that its normal for weatherman to have superior predictive ability and for tsunamis to be easier to predict than bubbles in markets or the economy.

I don't think that's normal at all. Matters are arranged that way for many reasons. Russia, china and other countries abandoning the dollar and replacing it with bitcoin could be considered evidence fiat dollar is a bubble and bitcoin is not. Of course we will not know for certain until maybe 5-10 years in the future. It could be accurate to say the dollar is a bubble today, for reasons discussed previously even if the hard evidence isn't available yet.

With Trump there is hope of him turning things around & the dollar not being a bubble.

If Hillary was in office the dollar would definitely be a bubble and there would be no hope at all.

I however, in so many words tried to point out that the sample size just isn't big enough yet to know for certain whether or not we are seeing this exponential growth but while I totally think that "social change is going to be ridiculous" is a little bit of an overstatement. Exponential growth is a function in math and seen all throughout nature and the physical world.

While I agree the price of btc is bound to do nothing but steadily go up over time I do think there are possibly some real parallels between what we're seeing and https://en.wikipedia.org/wiki/Exponential_learning . When I first saw the market during that huge jump it did seem to be exponential and it happened in a fairly quick type of way and then stabilized again except at the above price. Does anyone know the biggest decline as well as increase in price per BTC over it's 8ish so history? That was also my first reaction when I saw a visual representation of the value of btc over this few month period was that of an exponential curve.

While I agree with the poster quoted here that we are seeing some ASPECTS of exponential learning affecting the market price of btc it's hard to tell when this will stop as people MIGHT lose interest or go with other forms of currency. However, I am seeing some serious growth potential here with btc's value if you assume that it's positively correlated with people's ability to use the currency. A bubble implies some error in speculation (which drives market forces) from people at large in the value of a commodity such as with derivatives and housing lending in the late 2000s but from my understanding bitcoin's entire function of exist and creation (of decentralized e-currency) is the thing that's bound to drive it up. It's meant to work more effectively with more users and people are only bound to learn more of it over time. I know that I personally wished I could have seen how valuable a resource such as btc was and I was even shown by someone pretty savvy at IT when it first came out. (him using his wallet only on a USB drive on ubuntu).

I also do see a correlation here between moore's law (another exponential growth curve) and bitcoin as tech becomes more available and more cheaply distributed people's ability to learn the system becomes even greater thus increasing the value of bitcoin. This is why I don't see it as a BUBBLE per say I just dont know when it will level off (could have already).

Right now as a newbie "investor" and purchaser of bitcoins I am personally worried about the volatility of the market and how secure transactions truly can be. The world's primary exchange currencies are time-tested and have safe-guards automatically in place for the protection of the ignorance of the general public such as a very robust legal framework for the handling of large sums of money such as insurance and protection against scammers, theft and hacking. Not to mention regulations against crimes such as fraud, corruption, insider-trading, etc. With bitcoins I don't see any built-in safeguards outside of the transaction history which is just logged onto a single IP, and who is stopping anyone from hacking into your IP or using a proxy while making purchases? Not to mention who's stopping private companies such as exchanges and gambling sites from defrauding investors by blaming some outside cause or simply withdrawing all the funds from their clients' accounts and skipping town? This is not even mentioning obvious threats by phishing sites and hackers to simply empty your entire wallet.

In the end I believe if you believe bitcoin will become more and more an accepted medium of exchange, especially for larger transactions, such as buying larger EQUITY such as a nice home, business or other valuable property than the price will most definitely go up. The only question is how soon will this happen. I also made a thread wondering also if government regulation and taxation of bitcoins will drive up or down the price?

A big fault of what exactly?

What economic analysis which is not being very advanced as well as reliable are you talking about? Whether the US dollar is a bubble or not is questionable, but so far we haven't seen it burst in the way like stock markets crash. Therefore, you can't possibly say that "economic analysis" (whatever you might mean by that) was not very good at "predicting economic failure". You may want to clarify what your reply is about

Yeah exactly. America wants an ongoing and never ending war that will make them manufacture more weapons and print more money. They are not there in the middle east to win the war. That is not profitable for them. They are there to keep sure the war doesnt end, my friend. America has an economy that needs there to be a war.

I don't believe Bitcoin is in a bubble, but I'm pretty sure altcoins are. Even if Bitcoin is in a bubble, when altcoins crash, part of the capital will go back to Bitcoin. So it's almost a win-win situation.

The last time the united states went to "war" it spent in excess of $6.5 trillion and only succeeded in making its terrorist enemies more powerful. USA went to war and ISIS for example went from being a small organization to being a large, powerful, organization which encompasses near to the entire world? Spending $6.5 tril to achieve that, seems like a bad deal?

America is not equipped to wage war efficiently or cost effectively. It routinely inflicts a higher dollar damage amount to itself whenever it goes to war, than it manages to inflict on its enemies. I'm not certain what "war" is supposed to achieve? It would exacerbate the deficit and cause the united states to implode economically at a faster rate?


I think a big fault of this involves economic analysis not being very advanced or reliable in regard to recognizing or predicting economic failure.

Maybe that is deliberate as it makes it easier to unload toxic assets upon the unsuspecting.

I don't need to believe in that

What you call "currency manipulation" is one of the tools that central banks (like the Fed) use to regulate the financial (currency) markets, i.e. the currencies they happen to issue. And this is not something that that they do covertly, this is one of their major tasks written in their policies, i.e. to support the stability of the national currency including but certainly not limited to direct currency interventions. Whether they are good at it or not is another question. Sometimes they lose massively (see George Soros versus British pound affair). Regarding economic rules and laws, if they can override these, they will. If they can't, the rules will override them eventually. As simple as it gets

My friend. The United States of America will rather go start a war than fall like the USSR and East Germany did. In fact, they dont have to, because it is in the very interest of countries like China and Japan that America stays afloat. If they go down, theyre taking everyone with them.

Every fiat currency is backed by a government which has a monopoly in law enforcement and military protection in that country. 
The US however acts as the world's policeman. Since we have a toothless UN, the USA deems it fit to intervene in countries across the world. But I sincerely doubt whether the US military will go to war to protect the US dollar.

The fall of the USSR & end of the Cold War demonstrates how even superpowers are not immune to basic laws of economic disaster.

The USA being $20 trillion in debt could end in a similar fashion to the downfall of the USSR.

Although the media doesn't discuss it, the deficit could be the greatest threat to the united states in this day and age.

For these reasons the US dollar could be a bubble. It could be overvalued far more than bitcoin is.


The media loves to talk about china engaging in "currency manipulation". Its a question of whether you believe china is the only country in the world that engages in currency manipulation the way the media claims. Or whether the united states & other countries also manipulate the value of their currency to avoid the types of massive price corrections that should naturally follow countries adding trillions of dollars of deficit and debt to their balance sheet.

Its also a question of the double standard people have where they believe governments are exempt from basic rules of economics and that $20 trillion dollars of debt shouldn't affect a state the way it would affect a corporation or private sector entity.

You won't believe me


As to me, that's one of the most shitty arguments that I've read here recently

It is like saying that if something had been growing and we hadn't seen a price correction for it, it should necessarily be a bubble. It is like claiming that if you didn't find a proof of something, then you can safely conclude that it doesn't exist (I rephrase the old maxim that the absence of proof is not proof of absence). Anyway, people didn't believe in black swans at first either



Until they were actually discovered

Lets focus on USD. But USD is currently backed by the US government who has a monopoly in law enforcement and military protection of the United States of America. No matter what you say about the USD, you are forced to use it whether you like it or not. Its what funds the military to function. You wont be happy without it believe it or not.

I don't think that was a bubble but minor corrections that will result in the stability of the Bitcoin network. It needs constant sensitization and checking.

USD and EUR are bubbles.

They're bubbles as there has been no price correction to account for the magnificent amounts of debt accumulated by both EU and USA governments.

I hope you're learning something. Many patently false things said on this forum.

Actually USD and EUR are not bubbles. They just have no value.

Or to be fair, paper money has value. The value of the paper and ink. So you can say that a 500€ bill has pratically the same value of a 5€ bill

And the worst thing is that this is actually true

If you think bitcoin is a bubble, sell all the BTC you have & buy fiat or gold.

You won't do it: even you don't believe the things you're saying.

 

Russia, australia and japan are adopting bitcoin as they know fiat is a bubble and bitcoin is not.


EXACTLY.

Bitcoin isn't a bubble because its price movement can be explained and verified via increased trading volume and demand.

So you are removing bubbles from the scene?  What do we call this now, if we remove bubbles, should we removed corrections too?  Since these two is always present in pairs.  Anyway, I think the recent run of Bitcoin price is not a bubble because there is a reason for it to increase and there is a reason for people to demand for Bitcoins.  News, acceptance, projects of companies, this brings fresh funds to Bitcoin economy.  Aside from that, I believe there is still a huge market to be saturated.  So I guess this uptrend is normal.

For me I see the bitcoin bubble as a myth and to those who are still harbouring that idea are either I'll informed or does not want to be relevant with reality in the sense that they only try to compare on how price have increase over the years without even taking  into consideration the various downs that have been witnessed in between those comparing times and at the same time not understanding the basis for the increase in price ie the factors behind it.

As to me, this looks more like an inverse bubble. Here's the real bubble for your viewing pleasure:



Other than that, without the curve showing the rise in average wages, the chart you posted is pretty meaningless on its own. If the wages rose as fast the dollar depreciated, that would amount to 0 as a net effect. Further, as you have been already told, out of 20T dollars of the US national debt, only around 5T dollars are held to foreign holders, and this is in fact not a debt as such but rather a tribute paid by the holders of the debt to the US, or a payment that US itself charged the world for using the US dollar as a global currency

This is the real bubble.



This currency is issued by a government that is $20 trillion in debt.

Its value has not corrected for the amount of debt and danger present.

If "experts", "analysts", "journalists" weren't paid shills & charlatans they would be discussing this right now.

The euro/EU is also a bubble. The pound may also be one.

Russia, china, australia and other nations are getting rid of the US dollar(and adopting bitcoin) knowing USD is a bubble.

Very well said. It used to happen that bitcoin prices were inflated in past. But considering present situation I don't feel the whole rise is just inflated. It is pretty due to real increase as you said increased purchasing power (real income). People are increasingly entering the BTC world which is ultimate reason for this rise especially in Asian countries. 

The bubble is the United States dollar 1926 issue when they ceased to be secured by assets of the state. Now it's just a piece of paper for collectors who at any moment may lose value. I do not see the bitcoin in addition to advertising the company and it seems to me that bitcoin is also a bubble.

There would be a bubble if there werent any reasons under the current bitcoin price, but well we all know the news made price jump, legalization is making good to bitcoin value, the demand has raised a lot, and i dont see any bubble, just a purchasing power bigger then before. There are risks at bitcoin as any other altcoin, but the thing is i doubt bitcoin will touch again 1500 dollars, but i might be wrong.

Have you seen the recent difficulty increase? you are getting averagely 12.5 new Bitcoins every 10 minutes, no matter who and no matter how many they

Want the supply is limited and major coin holders are hodling like they mean it, so in a world where the most promising and legit digital currency was

Designed in such a clever way to make it scarce and valuable, do you know of another crypto currency with the backbone and a global industry behind

It like Bitcoin? if you know then where is it show me so I could engage with it as well. if people talk about ETH, how'd you know if they are not mining

ETH by ASIC miners without even telling people and sell to the public, is ETH even open source code? this isn't a bubble just accept it, there are no

Comparable alternatives for Bitcoin.

The people who are calling it a bubble are either who lost their funds in real bubble or they have not understood the background of the bitcoin system architecture. Even few of the friends tried to warn me not to waste my time in bitcoin as they read the negative coverage from the media portals. Bubble is something that happens in alt coin trading chart (pump and dump schemes) and I don't think bill gates or other billionaires are willing to spend time in making a bitcoin bubble (as considering the market cap, ordinary investors has no capacity to create a bubble like bitcoin).

"Earlier bitcoin was known as a currency for deep web and illegal market."

FCK
once again, those lucky bastards who was dealing cocaine is again those lucky bastards,who did own BTC only by PURE LUCK, now 100foldetheir assets, therefore no need to sell any cocaine anymore
thats what I call luck.

and again, who do the hard work (police, fireman, doctor, cleaning lady, teacher!) is BEHIND.

this World sucks

Bitcoin in the long term will never be a bubble but in the short term there will be times that it resembles very close to a bubble. Right now is possibly one. I would have said with certainty that this was a bubble a few weeks ago but we saw the correction of over $600 come but we've bounced back up again. It's best to not speculate with your coins if you are just a newbie, sell off at least a chunk and keep the rest.


As I said, bitcoin can definitely be in a bubble sometimes.

How else would you justify a $1000 increase over 1-2 weeks? No way the amount of bitcoin users just magically doubled or fiat currency just lost half its value. In the long term, btc is generally a good investment.

For those who see bitcoin as a bubble, they are entitled to their opinion and no amount of convincing argument can make them change their mind. However, their thinking is actually valid but its one sided looking at it only from the price alone ignoring other potentials in the blockchain technology itself which is the backbone of bitcoin that would solve several problems that have existed for long in the world and this alone will continue to provide support for bitcoin price.

I think the bitcoin price is going up because of the increase of genuine buyers. Only 0.1% of world population is into it. There is such a huge market still available to bitcoin. Bitcoin was in limelight recently due to that ransomware attack and Japan legalizing it finally. People are getting to know about it. Earlier bitcoin was known as a currency for deep web and illegal market. But now that thought is changing. People are calling it a bubble because whenever charts shows such a hike as shown by bitcoin recently, in other commodities, they usually end up in tears. But I don't think the hike in price is due to speculation. I think it is genuine increase in buying activity

Bubble does not need to go up to moon, then crash by free fall. Bear market can last up to decades (Japan)

But I think, if BTC would be used for black or just even grey market, it can do 10fold, because 40 or 400billion market cap, thats a like one inch ice cube in the ocean. Imagine if politicians use BTC for their grey trades (eg: government paying double, triple or more to friends company to finish some state work (roads, rails, any other public stuff). Speculators would sell at 5-8K for sure, but more speculators would buy, so it would be even.

Definitely,if an asset is worthless and its price still rises due to speculation,then definitely the bubble will burst quickly and will not last for a long time.But this is not the case with bitcoin.Its a product of worth and thats why more people are willing to buy bitcoins at any cost.

What are the many anonymous currencies that are currently used in the darknet besides BTC? I also want to know how much transaction volume those anonymous currencies have and if they are eating a large part of BTC's market in the darknet.

On the clear web you say LTC is ready to replace BTC. I also want to know how much transaction volume LTC and compare it to BTC's transaction volume. I think if there are merchants ready to accept LTC, they will but side by side with BTC. They will not replace it.

The number of sellers and buyers depends on the price. When the price of Bitcoin hit $1300 in 2013, the number of sellers easily outnumbered the buyers. If the price hits $10k this year, I am sure you will see truckloads of sellers.

Equity value is tied to a balance sheet of ______.

Currency value is tied to the balance sheet of a nation.

The USA being $20 trillion in debt can be a case for the US dollar being a bubble.

The european union being $12 trillion in debt can be a case for the euro being a bubble.

Currency bubbles do exist similar to equity bubbles.

That said he made a very good point about the unlikelihood of sellers outnumbering buyers due to many btc users being long term buy & hold.

Most people care only for the speculative value of Bitcoin

Apart from that, Bitcoin is most likely already crowded out from the DarkNet transactions. Many genuinely anonymous currencies have appeared since Bitcoin had been actively used in the dark web at the dawn of its life. Obviously, Bitcoin won't be able to make it back into the DarkNet. The throne is never empty, and it's already taken. So if Bitcoin speculative part is removed, how much will remain of its price? Even with respect to merchants, Litecoin is ready to take Bitcoin's place, and if Bitcoin becomes toxic thanks to disagreements and confrontations in its camp, merchants will likely stop using it

Thats true but BTC is already a currency in its own right. There are already many people using it in the darknet. All the commerce happening in there could only expand with the help of cryptocurrencies. But having said that, theres still a lot more speculators in the market speculating and making BTC overpriced.

Yes exactly, bitcoin is a currency not just an investment. But 90% of bitcoin users think it as of an investment venture and treat it like a stock, that's the primary reason why we see such high price fluctuations. Bitcoin will never be able to attain glory unless people accept it as a currency, what it was made for.

I understand that it is a bit controversial and counterintuitive

The difference between investing in a startup or something which would be as risky, on the one side, and Bitcoin, on the other, consists in the prior knowledge about your investment asset. Basically, when you "invest" in Bitcoin, you already know that Bitcoin is a sort of a pyramidal scheme, you know that beforehand. This is not the case with investing in new businesses. They may well turn out to be outright scams in the end (like dotcoms), but you don't know that in advance

You say that bitcoins are involved in the mechanism of compensation rates and then hope for a price increase. You decide what you wish for. I don't really understand the economy of bitcoins, but such growth rates can only be a soap bubble.

Well, then many other things people call investments, such as investing in startups and businesses, can hardly be called investments as well since their value is mostly speculative. Before a business actually starts profiting, it is as much of an investment as bitcoin is right now. Both are based solely on speculation and promise of future value or return of investment. Once bitcoin becomes more mainstream and transacted more often and its shortcomings are addressed, we will be able to see solid, actual value in bitcoin as a currency and not so much as an investment.

That's why Bitcoin can hardly be called an investment

I guess many would disagree with that statement but is there anyone who would call pouring your money into a Ponzy scheme or HYIP shebang an investment? Unless Bitcoin becomes a currency in its own right, it will remain in the state of a "financial pyramid" mainly. As long as it expands, its price could rise as well, but it can't expand indefinitely if it is set to remain only that, i.e. a highly speculative asset. That's likely another reason why we see so much confrontation in the Bitcoin camp right now

As the dude in the video said it is a Currency not a Investment or Stock.
In my opinion it is more like long term investment like some hold on to the family gold.
Bitcoin is much much more better because it haves only 21M not more then that like USD or EUR. It does not have inflation. The price is based only on demand and supply, and the supply could not get more then the daily / yearly available from mining.

So meaning all that value comes from speculation, like the dotcom bubble. Thats a very dangerous spot to be in because it could all start going south. What we would rather much be seeing is the growth of unique users and the growth of transactions or usage instead of the growth in price.

Bitcoin is not a bubble because the price now is pumping and if it is bubble then the scenario that will happen is dumping but now it is pumping and i think the price is now getting back to a high price and soon we will see a good price again and people will start getting into bitcoin again because of the good price of bitcoin again.

Yup, that's the disadvantage of it. Like how they say you'd know which alt would be crashing soon when you see it being shilled here in the forum as well as trollboxes.

I just try to be more optimistic as I can. Though I probably wouldn't be able to buy in bulk during crashes, I just keep telling myself that somehow, others manage to buy low and stay for the next cycle.

I'm not sure about the microtransactions. I know very little of how most of the tech works but it really would be helpful if people can also freely spend their bitcoins without much worry of delays and high fees. That could actually encourage more merchant to accept them, increasing penetration in the mind of the public.

It is already there, called "segwit". Segwit is an upgrade which can make bitcoin great again.

It will basically allows you to purchase coffees very fast with a little fee.

But there is one problem. It needs to be activated by a miner consensus because it is the most secure way but the biggest miner company Bitmain evil Corp. is blocking it.

Yes, antminers' ceo Jihan Wu is against bitcoin's development because he wants high fees, so he can keep milking the cow (us)

Proof: https://twitter.com/JihanWu/status/868896110760181760

Don't buy antminers from bitmain.

Good points, and I think we were on the same page with buyers vs. sellers, you just phrased your argument better. 

One thing you brought up is merchant adoption, is that really necessary at this stage?  Bitcoin is the best currency for store of value, but everyone knows its weak as a medium of exchange.  Gold also sucks as a medium of exchange.  Is there a healthy path forward for Bitcoin without short-term merchant growth? 

The amount of Bitcoin being bought is always the same as the amount being sold.  All that "more buyers" or "more sellers" means is that the prices are changing to reflect what people are willing to buy/sell it for.  Shortening it to buyers vs. sellers would be an oversimplification.

There are no "fundamentals" in Bitcoin in that nothing really pegs the price down and it does what it wants.  There could be a very slow increase over several months which was still a bubble, and there could also be a very slow decline which was not a death - you're right in that regard - but if merchant adoption doesn't match these trends, the increases are speculation-fuelled and are not "real" growth.

When the price just doubled in the past couple months, which of those buyers actually intended to spend Bitcoin in stores?  If the answer is not a lot, then the price growth is just a self-fulfilling prophecy, and will end as soon as people feel like they won't get rich.  That kind of media attention is extremely unhealthy because as soon as Bitcoin's price is going down, they turn on us and so does the market.

Personally, Bitcoin is not actually a bubble because as we see now there is that mechanism involved which corrects the price of Bitcoin when it reached a certain level. Bitcoin is self-regulating  itself and this can be verified in its history. Now, when Bitcoin will soon new heights we will see what can happen by then. A bubble will usually burst leaving many people holding empty bags.

Not quite, he is saying that it depends on # of buyers vs. # of sellers at any given moment.  Speculation creates value, and this in turn creates more demand, mainstream media attention, etc. A fast run-up in price doesn't make a bubble. Bitcoin has and will continue to attract media attention and more of the general population.  It's healthy to have these waves of price increases, it means that the media is influencing a larger number of people and turning them into buyers aka demand-creators

The argument that guy in that video is giving solidifies that BTC is indeed a bubble. Hes saying that BTC's price depends on the law of supply and demand. Doesnt he realize that most of the demand in Bitcoin comes from speculation? Theres also some reason to believe that the new ICOs that have accumulated millions have helped increase the price of BTC. There are no fundamentals, its mostly speculation.

That guy just maybe wants to gain followers for his channel.

Yes, so the video briefly goes over the pricing aspect too. Currencies are a positive feedback loop until one of two situations: widespread acceptance or obsolescence.  There is no equilibrium middle ground for similar currencies.  The ones with more support prevail in the long run. 

Currency =/= equity, you're right that many are confused...but I'm not sure this justifies a faster run-up in price, however I'm certainly no economist.  Thoughts? 

Pretty good points about the current valuation and prospects for rising bitcoin values!

https://www.youtube.com/watch?v=4bSLCQ1P0CU