Bitcoin is forming a bubble and that is an indisputable fact

[ktabb]

Okay so maybe there is actually a little room for debate but at least I got your attention! That being said, I don't see how anybody could possibly argue that Bitcoin is not forming a bubble.

Financial bubbles form when there is a large disparity between an asset's market price and intrinsic value. It is easy to measure this with a stock by looking at fundamental stats like revenue and pe/ps ratios, but it is harder with Bitcoin. That being said, we can still identify the factors that affect Bitcoin's value and see how they have moved compared to bitcoin's price.

What factors affect the intrinsic value of Bitcoin?
1. Number of major vendors accepting Bitcoin payments.
2. Legality of Bitcoin across the world
3. Ease of use to buy, store, and spend Bitcoin

Bitcoin's price has tripled in less than 3 months. Have these factors that affect bitcoin's price changed accordingly? No, they have not. As is the case with all bubbles, investors have fallen into a buying frenzy fueled by media hype and a snowball effect which has pushed the price up far faster than the value has risen. The larger this gap grows, the more likely it breaks and crashes. It's like stretching a rubber band. There will be a tipping point when it comes crashing back down.

All that being said, I am bullish on Bitcoin long term. However, it does have some hurdles to overcome before it can really be taken seriously.

[BitcoinHodler]

"The intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value."

the problem is this definition doesn't match a cryptocurrency, or better said a new technology that is still in its adoption phase. and as the demand increases the price also increases since the supply is going to be always fixed.

Bitcoin's price has tripled in less than 3 months.

3 months ago price was $1250 and 3 times means $3750
you are looking at a wrong price, you are considering the very bottom of the massive FUD/panic/correction dip as the real price of bitcoin which has tripled!!!
that doesn't make sense.

this is still a big rise though.

Have these factors that affect bitcoin's price changed accordingly? No, they have not.

yes they have!
you just missed a couple huge news!
- Japan accepted bitcoin as a legal way of payment. because of that a lot of businesses in their country started accepting bitcoin > huge increase in adoption.
a lot of traders came in and started trading bitcoin because now it is regulated.
a couple of the biggest Forex brokers in their country added bitcoin trading for their users > a huge increase in adoption.

- Russia, a big country finally changed their mind about bitcoin and showed some green light about doing the same as Japan.
- a couple of other countries also did this or at least said their are considering it such as Australia and a couple of European countries.

- Chinese central bank finally stopped their investigation of Chinese exchanges and allowed them to come back and under regulations. this means a lot of money came back and also a lot more will continue to come in just because it is not legal and regulated.

As is the case with all bubbles, investors have fallen into a buying frenzy fueled by media hype and a snowball effect which has pushed the price up far faster than the value has risen. The larger this gap grows, the more likely it breaks and crashes. It's like stretching a rubber band. There will be a tipping point when it comes crashing back down.

All that being said, I am bullish on Bitcoin long term. However, it does have some hurdles to overcome before it can really be taken seriously.

to be honest, i don't think so
there is a lot of new money coming in and the world's view about bitcoin is changing. what Japanese did may seem small in words but it actually is a huge deal. they are the first country to fully adopt bitcoin and legally!

and don't forget that it has been 8 years. bitcoin has already proven its power and usefulness despite all the drama and internal fights that are going on.

[ktabb]

Bitcoin's price has tripled in less than 3 months.

3 months ago price was $1250 and 3 times means $3750
you are looking at a wrong price, you are considering the very bottom of the massive FUD/panic/correction dip as the real price of bitcoin which has tripled!!!
that doesn't make sense.

this is still a big rise though.

It doesn't really matter exactly how much it rose, I think you got the point I was making... but for the record, it did triple. The time frame isin't exactly 3 months but from about 2.5 months ago to like a week ago, it went from under $900 to $2800. So right now it is a bit lower, but the overall point being made here is that Bitcoin has risen extremely fast over the past several months, and even year.

Have these factors that affect bitcoin's price changed accordingly? No, they have not.

yes they have!
you just missed a couple huge news!
- Japan accepted bitcoin as a legal way of payment. because of that a lot of businesses in their country started accepting bitcoin > huge increase in adoption.
a lot of traders came in and started trading bitcoin because now it is regulated.
a couple of the biggest Forex brokers in their country added bitcoin trading for their users > a huge increase in adoption.

- Russia, a big country finally changed their mind about bitcoin and showed some green light about doing the same as Japan.
- a couple of other countries also did this or at least said their are considering it such as Australia and a couple of European countries.

- Chinese central bank finally stopped their investigation of Chinese exchanges and allowed them to come back and under regulations. this means a lot of money came back and also a lot more will continue to come in just because it is not legal and regulated.

You are right that these points are good for Bitcoin, but I do not believe that they merit the rise that we have seen. Clearly you believe they do. The only evidence I can offer you that they do not merit the rise is that we can say with 100% certainty that the price will rise by an amount more than warranted by this news, and we know that the greater the media hype, the larger this disparity will be. News events ALWAYS push the price of an asset too far to one side before it corrects. Sometimes it is only by a small amount, but investors never hit the nail on the head. When an asset's price rises on good news, it always spikes a little too high and then corrects back down - same with when prices fall. We did see this with bitcoin hitting $2800, but I believe it is not done rising and we will see it to an even larger degree soon.

This is the basic principal of Warren Buffet's value investing, and it always happens. The fact that bitcoin's investors are mostly retail investors with weak hands, who jump on board with buying and selling frenzies easily, suggests that the disparity between price and value will be even larger.

As is the case with all bubbles, investors have fallen into a buying frenzy fueled by media hype and a snowball effect which has pushed the price up far faster than the value has risen. The larger this gap grows, the more likely it breaks and crashes. It's like stretching a rubber band. There will be a tipping point when it comes crashing back down.

All that being said, I am bullish on Bitcoin long term. However, it does have some hurdles to overcome before it can really be taken seriously.

to be honest, i don't think so
there is a lot of new money coming in and the world's view about bitcoin is changing. what Japanese did may seem small in words but it actually is a huge deal. they are the first country to fully adopt bitcoin and legally!

and don't forget that it has been 8 years. bitcoin has already proven its power and usefulness despite all the drama and internal fights that are going on.

The reason I disagree with this is because even though new money is coming in, it is not institutional money. It is not smart money, it is more people who want to get rich quick. When hedge funds and other institutional investors start buying into bitcoin, then it can see sustained long term growth. Right now though, it is still just a rollercoaster of bubbles and manias.

For bitcoin to really become useful as a currency, it needs to stabilize. It can't be rising like crazy the way we are seeing today. Ironically, the more it is adopted, the more volatile it becomes, and therefore the less valuable it becomes (it would be more valuable if it were stable). I wrote a post discussing this conundrum if you are interested: http://www.demoinvestor.com/articles/00000001

[Torque]

Everyone is running around looking for either a) Bitcoin's killer app, or b) the next big cryptocurrency/ICO/dapp/whatever

Funny thing is, though:

Bitcoin IS THE KILLER APP. It's the answer staring everyone in the face.

The debt-fueled fiat banking system is the problem. Bitcoin itself is the solution.

[rjclarke2000]

Everyone is running around looking for either a) Bitcoin's killer app, or b) the next big cryptocurrency/ICO/dapp/whatever

Funny thing is, though:

Bitcoin IS THE KILLER APP. It's the answer staring everyone in the face.

The debt-fueled fiat banking system is the problem. Bitcoin itself is the solution.

How long before people wake up? Maybe they won't.

[ktabb]

Everyone is running around looking for either a) Bitcoin's killer app, or b) the next big cryptocurrency/ICO/dapp/whatever

Funny thing is, though:

Bitcoin IS THE KILLER APP. It's the answer staring everyone in the face.

The debt-fueled fiat banking system is the problem. Bitcoin itself is the solution.

This could be true but it is unrelated to what I wrote in the original post.

[taxmanmt5]

Okay so maybe there is actually a little room for debate but at least I got your attention! That being said, I don't see how anybody could possibly argue that Bitcoin is not forming a bubble.

Financial bubbles form when there is a large disparity between an asset's market price and intrinsic value. It is easy to measure this with a stock by looking at fundamental stats like revenue and pe/ps ratios, but it is harder with Bitcoin. That being said, we can still identify the factors that affect Bitcoin's value and see how they have moved compared to bitcoin's price.

What factors affect the intrinsic value of Bitcoin?
1. Number of major vendors accepting Bitcoin payments.
2. Legality of Bitcoin across the world
3. Ease of use to buy, store, and spend Bitcoin

Bitcoin's price has tripled in less than 3 months. Have these factors that affect bitcoin's price changed accordingly? No, they have not. As is the case with all bubbles, investors have fallen into a buying frenzy fueled by media hype and a snowball effect which has pushed the price up far faster than the value has risen. The larger this gap grows, the more likely it breaks and crashes. It's like stretching a rubber band. There will be a tipping point when it comes crashing back down.

All that being said, I am bullish on Bitcoin long term. However, it does have some hurdles to overcome before it can really be taken seriously.

Most of the people that I know are investing in a hedge fund style.  Bitcoin is the Walmart of their hedge fund.  From Bitcoin, it is all smart money, because even if a newbie gets a few coins and blows it away in the wind, it has been released from the chain and will eventually make it into the pockets of those investors that know what they are doing.
 

[Cosbycoin]

A commodity does not need to have a value based on real time demand. It is usual to have higher value just due to hype. This is what we are having with bitcoin prices right now. Basically traders do speculate future events and pump the prices. Other than that, they will not be having any viable solution for how to trade.

[jjacob]

Even if we consider that valuations are high, the question is when (if ever) will this bubble burst?
I don't consider a 20% drop in price as a bubble bursting. This bull run looks like it could continue for a long time.

[ktabb]

Even if we consider that valuations are high, the question is when (if ever) will this bubble burst?
I don't consider a 20% drop in price as a bubble bursting. This bull run looks like it could continue for a long time.

I agree that it hasn't peaked yet, but bitcoin investors have historically consistently overbought and pushed bitcoin into a bubble pattern on good news. But you are right that it is very difficult to determine when a bubble will burst. I have been predicting roughly $4,000-$5,000.

https://twitter.com/DemoInvestor/status/867491235296161792

[Amph]

this is not a bubble, only delusional bear can think that, they just want to short toacquire cheap coin

the last dump was just a correction, a big one but a correction, the value increased very slowly, and always returned to the same level after the dump

this is a indisputable signal of the value skyrocketing, and not a sign of any bubble by how the thing look, a bubble for me is only when the value return to the same point as before the pump started, pretty much what happened in 2013

[romero121]

As stated by most users all around its completely not a bubble. It's the growth that happening in a gradual manner and the corrective factors​ at times make the price grow bigger as well falling low. Hope the ongoing price increase is the correction in the positive side.

[Denker]

Not a bubble yet. We saw awesome gains followed by corrections. Some bigger than others.
Altcoins are in a bubble. A massive one. But Bitcoin is not. But this may change in the future. A lot of this also depends what is going to happen the next few weeks due to SegWit activation in august. We are in exciting times at the moment.

[RoommateAgreement]

the bubble formed then it busted and now it is all over. you are late

the bubble is when price goes high too fast and then when you think it is over it still continues upward. and the burst is then it comes down which it did. and if we were still in the bubble the price could never go back on track of rising up again and crossing $2500!
this is now a legit rise.

[ktabb]

You guys are claiming that it's not a bubble but not replying to any of the points I made. How can you say bitcoin is not forming a bubble when bitcoin investors have historically consistently overbought bitcoin to very large degrees in buying manias and pushed the price into bubble territory? We see bubbles in bitcoin on a regular basis, and we haven't seen one since 2013.

People who are posting here and simply denying it and dismissing me as a short are completely delusional and they are the reason that bubbles form - foolish investors jumping on board with buying manias.

For the record, I have no short or long position in bitcoin right now.

[BitcoinHodler]

i am not denying that this was big rise and you can even call it a bubble. i am mostly trying to point out that this is not a huge bubble as many like to say and it has already blown up and price corrected most part of it.

The reason I disagree with this is because even though new money is coming in, it is not institutional money. It is not smart money, it is more people who want to get rich quick. When hedge funds and other institutional investors start buying into bitcoin, then it can see sustained long term growth. Right now though, it is still just a rollercoaster of bubbles and manias.

the smart money came in a long time ago and has been fixating its foothold in bitcoin for a long time.
and i am not really a big fan of hedge funds and instituotional investors coming in bitcoin, but according to an article i read on coindesk some time ago it seems like there are at least 6 of them currently claiming that they are trading bitcoin.
additionally there are currently a couple of those retirement plans that are offering bitcoin as an option.

For bitcoin to really become useful as a currency, it needs to stabilize. It can't be rising like crazy the way we are seeing today.

i completely agree.

Ironically, the more it is adopted, the more volatile it becomes, and therefore the less valuable it becomes (it would be more valuable if it were stable). I wrote a post discussing this conundrum if you are interested: http://www.demoinvestor.com/articles/00000001

it is a process that is going to take a lot of time. i wouldn't really call it less valuable.
it starts slow (2009 to late 2010) then it speeds up because people usually find out about these things all of a sudden (2011 up to today) and then when it grows big enough it will again slow down (2020 maybe?).
someone said something interesting about APPL shares so i went ahead and took a screenshot of it - the red one is APPL (see the resemblance)

[ktabb]

the smart money came in a long time ago and has been fixating its foothold in bitcoin for a long time.
and i am not really a big fan of hedge funds and instituotional investors coming in bitcoin, but according to an article i read on coindesk some time ago it seems like there are at least 6 of them currently claiming that they are trading bitcoin.
additionally there are currently a couple of those retirement plans that are offering bitcoin as an option.

The amount of institutional investors in bitcoin is still extremely small compared to, for example, any of the dow stocks. While the idea of giving away bitcoin to the hands of wall street billionaires may not sound appealing, it is the best way to stabilize the price. When something like 50% of bitcoins are owned by institutional investors, the price will definitely be significantly more stable.

Retail investors will always buy into manias and push assets up and down like crazy. They have weaker hands. Especially bitcoin investors. As long as people are out there trying to use bitcoin to get rich quick, it will remain too volatile to stabilize and grow as a currency.

[el kaka22]

A commodity does not need to have a value based on real time demand. It is usual to have higher value just due to hype. This is what we are having with bitcoin prices right now. Basically traders do speculate future events and pump the prices. Other than that, they will not be having any viable solution for how to trade.

We cannot say that the price of one commodity is being pumped blindly but traders foresee future demand and based on that they pump the prices. (when the pump is happening blindly, that must be the right example of forming pure bubble). Now come with the case of bitcoins, we can be sure that any trader can foresee its future and for that they can go for pumping.

When bitcoin has definite bright future, we could never call bubble is being formed. Fundamentally bitcoin can have any value because it is going to get used as currency. So, people may buy it for whatever price and can spend for same prices. I believe bitcoin now itself can have any big value, hence we can never assume it is forming bubble.

[Casabrandy]

Here we go again on bubble speculation. Putting some graphs which is usually occurs and making some speculation about dumping so that many will panic and sell their coin to prevent pumping. I'm sicked on seeing gameplay like this. :/

[maku]

The amount of institutional investors in bitcoin is still extremely small compared to, for example, any of the dow stocks. While the idea of giving away bitcoin to the hands of wall street billionaires may not sound appealing, it is the best way to stabilize the price. When something like 50% of bitcoins are owned by institutional investors, the price will definitely be significantly more stable.

Retail investors will always buy into manias and push assets up and down like crazy. They have weaker hands. Especially bitcoin investors. As long as people are out there trying to use bitcoin to get rich quick, it will remain too volatile to stabilize and grow as a currency.

The question is: do we really need institutional money to flow into bitcoin?
Of course, it would be great, but Bitcoin if just fine as being alternative asset - used mostly by people, not businesses.
Bitcoin is like stock - available for anyone, without need of contacting any middlemen to purchase it.
Price of bitcoin will be more stable over time, more people using BTC = less volatility.