Hype cycle or Bubble Mania?

[naima53]

I meant that we should once again retest 7.2 before the next bubble inflates.

[cloon]

we are not here, cause the apple-product selling reached market saturation, while bitcoin has functions of a currency.
a comparision is hard to make, I guess the use of bitcoin will explode in future!

[Spekulatius]

we are not here, cause the apple-product selling reached market saturation, while bitcoin has functions of a currency.
a comparision is hard to make, I guess the use of bitcoin will explode in future!

I said (at least I thought I did), that we are here while riding the current hype cycle. With a change of fundamentals, like increased demand (lets say amazon adopts bitcoin) a new hype cycle will start on top of the old one (see apple hype cycle chart on 1st page).

In other words: If nothing changes, we are here (see arrow).

I certainly expect things to change though.

[naima53]

\....\
Here is an example of a company that managed to start one bubble after another:



As you can see, every positive change in fundamentals (like the introduction of top selling products) delays the plateau of productivity and triggers a new hype. If we could bring about such fundamental changes, bitcoin would be drastically overvalued again and again till an equilibrium of its true near term capabilities and expectations is accomplished. Such disruptive change could be very successfull applications like Silk Road is. Possible candidates are US poker sites that use bitcoin for that vast untapped market, megabox (if it would be successfull and bitcoin its only currency) or the secondary market for online game articles. Also further feautures that may increase bitcoin's value once implemented may have such effect, like the capabilities for smart property, smart contracts, voting, decentralised financial instruments markets and so on.

For further reading I suggest Mastering the Hype Cycle by Jackie Fenn and Mark Raskino. A very insightful book about how to spot, manage and learn from hype cycles. It is such a common and easy to apply concept that you can find it in almost every new technology that creates a stir. Also ways to predict what will happen to bitcoin can be found here, as the Gartner Hype Cycle very well applies to what we have seen so far with bitcoin

https://www.youtube.com/watch?v=Os1t_n5-joA
  (Russian laugh over this system sales. (HYIP method of sale). But continue to buy.)

[Spekulatius]

\....\
Here is an example of a company that managed to start one bubble after another:



As you can see, every positive change in fundamentals (like the introduction of top selling products) delays the plateau of productivity and triggers a new hype. If we could bring about such fundamental changes, bitcoin would be drastically overvalued again and again till an equilibrium of its true near term capabilities and expectations is accomplished. Such disruptive change could be very successfull applications like Silk Road is. Possible candidates are US poker sites that use bitcoin for that vast untapped market, megabox (if it would be successfull and bitcoin its only currency) or the secondary market for online game articles. Also further feautures that may increase bitcoin's value once implemented may have such effect, like the capabilities for smart property, smart contracts, voting, decentralised financial instruments markets and so on.

For further reading I suggest Mastering the Hype Cycle by Jackie Fenn and Mark Raskino. A very insightful book about how to spot, manage and learn from hype cycles. It is such a common and easy to apply concept that you can find it in almost every new technology that creates a stir. Also ways to predict what will happen to bitcoin can be found here, as the Gartner Hype Cycle very well applies to what we have seen so far with bitcoin

https://www.youtube.com/watch?v=Os1t_n5-joA
  (Russian laugh over this system sales. (HYIP method of sale). But continue to buy.)

Sounds funny, what does he sing?

[TraderTimm]

In strict terms, we haven't had a bubble - but I keep seeing the term being thrown around without any regard to what a market bubble really is.

If we had a bubble at any point - bitcoin would be under a dollar and hovering somewhere between 0 - 0.25 or less. That is what happens to bubble markets, total loss of confidence and it remains stagnating where it began.

Apple has a product dev cycle, which is also not strictly a bubble. Can their stock go down to zero? Unlikely, but it can fluctuate quite a bit - such as being near the 6-month lows as they are now.

Can bitcoin be hyped and have manic phases of price increase? Sure, but you have to consider the yardstick you're using to measure bitcoin's 'worth' is also changing. We're in perpetual QE now, so when the currency is debased by various means and fancy financial acronyms, it will affect how we measure the price of bitcoin.

Some of the metrics that make sense to compare are month-over-month and year-over-year volume and transaction trends, merchant adoption, and tools that increase bitcoin ease-of-use and spending velocity.

While the gartner cycle is illustrative of certain phases, I don't think you can directly relate it to a price comparison of bitcoin.

[Spekulatius]

In strict terms, we haven't had a bubble - but I keep seeing the term being thrown around without any regard to what a market bubble really is.

If we had a bubble at any point - bitcoin would be under a dollar and hovering somewhere between 0 - 0.25 or less. That is what happens to bubble markets, total loss of confidence and it remains stagnating where it began.

Apple has a product dev cycle, which is also not strictly a bubble. Can their stock go down to zero? Unlikely, but it can fluctuate quite a bit - such as being near the 6-month lows as they are now.

Can bitcoin be hyped and have manic phases of price increase? Sure, but you have to consider the yardstick you're using to measure bitcoin's 'worth' is also changing. We're in perpetual QE now, so when the currency is debased by various means and fancy financial acronyms, it will affect how we measure the price of bitcoin.

Some of the metrics that make sense to compare are month-over-month and year-over-year volume and transaction trends, merchant adoption, and tools that increase bitcoin ease-of-use and spending velocity.

While the gartner cycle is illustrative of certain phases, I don't think you can directly relate it to a price comparison of bitcoin.

1. What definition of "bubble" do you use? (link?) I guess there are different views on what a bubble is and whether prices have to go down to zero in succession.

2. I think the Gartner model fits almost perfectly (to this point in time) and will provide guidance in the future as well should fundamentals change (as they most likely will, --> see wordpress.com).

[michaelmclees]

These charts are not helpful.  Technical Analysis is barely helpful.

Look at fundamentals and you'll see Bitcoin is a long, long hold.  Comparing Bitcoin to various iPods isn't even close to what you need to be doing.

What you need to do is this.  Imagine the world before the discovery of gold.  Now imagine a few civilizations are using gold for trade.  Then imagine everything that came after that.

Bitcoin is roughly at the initial stage where for the vast majority of the world, they are before the discovery of Bitcoin.  If you can accumulate 1,000 BTC or so and wait 50 years... there is a distinct possibility that you'll find yourself at the top of a very, very tall mountain.  This would be my plan.

Adjust everything for inflation.

At $1,000 per BTC, sell 100 and buy a new house.

At $10,000 per BTC, sell 100 and buy a new house.

At $100,000 per BTC, sell 100 and open several successful franchises, McDonalds, Taco Bell... etc...

At $1,000,000 per BTC, 100 and purchase an enormous annuity.

Spend the rest in small amounts as needed.

You've got to understand how quickly this can happen.  This isn't a matter of it happening over the course of 5,000 years; it can happen in our lifetimes.  Or Bitcoin will become nothing... and you lose 11 grand in 2012 dollars.

[TraderTimm]

1. What definition of "bubble" do you use? (link?) I guess there are different views on what a bubble is and whether prices have to go down to zero in succession.

2. I think the Gartner model fits almost perfectly (to this point in time) and will provide guidance in the future as well should fundamentals change (as they most likely will, --> see wordpress.com).

This wikipedia entry is illuminating - https://en.wikipedia.org/wiki/Stock_market_bubble Especially if you draw a straight line under either the NASDAQ or Nikkei index for the pre-rally prices preceding the dot-com bubble. Prices inflate, reach a euphoric peak, then decline to previous levels.

There are exceptions where the 'previous level' ends up being a complete lack of confidence in the investment itself, so is manifested by a zero price valuation, but those are fairly rare. You do see this kind of behavior in thinly traded issues like 'pink sheet' penny stocks and other highly speculative investments.

That is why I say we're not in any bubble, or have been, because we would be trading around the inception price of bitcoin -- or at zero.

We most certainly have had run-ups and blow off peaks, but you get those in commodities and other markets as well. Such as the summer run-up of wheat during the severe drought in the USA.

I have no issue with the Gartner model, just that correlating it to price movement doesn't make any sense. It is meant as a general representation versus a literal one - ie., you can't say we start at 0.25, swing up to 40, then stay at 12 forever on a gradual up-slope.