Bitcoin Bubble: Definition And Its Impact On Investors

The bitcoin bubble is a cryptocurrency equivalent of the phenomenon economic bubble. An economic bubble happens when the price of a certain good increases far higher than its real value to a stage where it is not sustainable anymore.

This usually leads to a huge burst in the asset or decreases its value considerably. Financial bubbles have happened in history before this including the stock market bubble, carbon bubble, tulip mania, railway mania, the dot com bubble, the 2000s United States housing bubble, and much more.

The increase in the value is related to a bubble growing bigger only to pop when it reaches a particular period. 

What Is The Bitcoin Bubble? A Definition

Bitcoin is facing a bigger boom than many of the other great financial assets. The crypto veterans and the industry watchdogs, some of them not all, believe that it is going to be just another bubble pop and refer to it as a Bitcoin bubble.

They view that the bullish runs are taking the airport to higher value but soon it is going to fall down contracting in its value.

It is not the first time the world has seen a financial asset gain price to cross all the thresholds and soar as high as possible and a huge fall has always been quite inevitable. When the value of Bitcoin increases above a particular point it will face inflation diminishing its value. 

Bitcoin is not the only cryptocurrency that has faced this bubble phenomenon. The whole cryptocurrency is said to be an economic bubble with some referring to it as the ‘cryptocurrency bubble’. 

Is Bitcoin Bubble Real?

We do not have an exact answer for this. It is difficult to answer the question. Bitcoin is a cryptocurrency having high volatility. Therefore, to say whether BTC has surged above its real value we need to know its real value which is quite hard to determine.

Also, BTC does not have a big track record of data as it is relatively a new company. So far, it has had many bullish and bearish runs and trends in the market.

The reason why many perceive Bitcoin as a bubble maybe this sudden price hike and fall. The real value of BTC can not be determined using the traditional methods that investors usually use to find the value of real-world assets. 

What You Need To Know As An Investor?

A considerable community of people does believe that Bitcoin is a bubble and they do not look at it as a safe investing option. While that scenario exists, what do you need to know as an investor? Have you already invested in BTC? Or, have you been planning to make an investment? Continue reading. 

Some Key People Who Think Bitcoin is Overvalued:

The CEO of JPMorgan Chase Jamie Dimon does not agree that Bitcoin is for everyone. He looks at it skeptically and says that he thinks it is a decentralized Ponzi scheme. He seems to be not confident in investing in Bitcoin, however, he has a different view of stablecoins. Dimon thinks that a stablecoin is well-regulated. 

The CEO and annual shareholder of Berkshire Hathaway Warren Buffet thinks BTC does not generate income for its owners. He does agree that some companies may be valuable by producing the value in a traditional sense however he does not think that Bitcoin falls in that category. 

Simultaneously, Who Thinks BTC is Promising?

The CEO of Block, the parent company of Square and Cash App, and the man who founded Twitter, Jack Dorsey thinks that Bitcoin has a bright future. He gives importance to working on BTC and he thinks it is the most promising cryptocoin out there. 

The billionaire venture capitalist and tech investor Marc Andreessen has been promoting Bitcoin for the past several years. He supports investing in Bicin and he really thinks it is going to be beneficial for him. He is the master brain behind Andreessen Horowitz, his investment firm which has made big investments in many crypto-related projects so far. 

The Bottom Line

Bitcoin seems to be promising a crypto and seems to have a future for long-term investments. However, there is an existing notion that it is another financial bubble that may pop up at any time.

If you are concerned about this we recommend you restrict your exposure to BTC investments and do not invest above 10% of your total holdings in it.

Leave a Comment

© 2024 eBizMBA Inc. All Rights Reserved