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The Bitcoin Bubble: Does It Really Exist?

Bitcoin Bubble
Posted: January 13, 2018 at 8:12 pm   /   by   /   comments (0)

Bitcoin and cryptocurrencies are the hot topic nowadays. Many major media outlets are starting to pay attention to it and several countries as well. In the case of the US, residents are not allowed to participate in ICOs (Initial Coin Offerings) and the state is pushing for regulations on BTC as well as the rest of cryptocurrencies.

The same happened in China with the ICO ban and many other countries are trying to install regulations in order to protect investors.

However, there is one accusation in special: “Bitcoin is a bubble”. It is often used by traditional investors and economists who do not understand how cryptocurrencies work at all. However, this article will show you why Bitcoin is not a bubble by comparing it to a real bubble case: real estate.

Bitcoin Bubble

Image: quora.com

Fear The Real Estate Bubble and Not Bitcoin:

The fear of a forming bubble in cryptocurrencies is mainly due to how fast prices have grown during 2017 and first half of January 2018. However, those who point out this non-existent problem should better pay attention a real bubble present in real estate.

Sure, buying a nice beach house or villa and offering Palm Springs luxury rentals can bring you a good income, but it does not take away the fact that there is a bubble in real estate and it has a risk of exploding sooner than we think.

There is one fact that indicates the existence of this bubble, and is that the prices of real estate have hit an all-the-time high that is not supported by the performance of the broader economy.

Moreover, this phenomenon is being observed not only in the US, but also in Canada and the United Kingdom. Even though, only a few analysts talk about this apparent bubble that could pop in any given moment…

Another point to take into account is that people who invest in cryptocurrencies, many of them, do not do it with their savings. The same cannot be said about stocks or real estate, where people tend to invest far more money thinking of it as a long-term goal, and therefore, a bubble in these markets is far more damaging.

Cryptocurrencies Are Young Yet:

The oldest cryptocurrency – Bitcoin – is less than 10 years old and many of the newest altcoins are very new. Therefore, they are in the early stages of development and there is still plenty of room for growth.

These early stages bring a much better relationship between risk and rewards than real estate, which is much older, and as many analysts have pointed out, the bubble is there because prices keep rising while broader economy does not justify them.

Moreover, the total market capitalization of all cryptocurrencies is still below 1 trillion, which is much smaller than total capitalization of real estate and other older markets.

There Is Risk:

However, investing in cryptocurrencies can be very risky without proper research, because these markets tend to be very volatile. Before investing, one should educate on blockchain technology, how to use exchanges and how to perform proper fundamental analysis.

Another latent risk is that there are many projects that have acquired their value based solely on their whitepaper, and that is another downside. However, as we are still in the early stages, they have plenty of time to deliver their products and solutions to real-world problems.

Final Words:

As we can see, Bitcoin and cryptocurrencies in general are far from being a bubble yet. The same cannot be said about real estate, which has a real bubble problem that once it bursts, will affect the lives of millions of persons.