What is causing the Bitcoin bubble?

[Sundark]

So far we have some analysts saying that bitcoin is totally undervalued and the true value of BTC should be at least $10000
They based this opinion of bitcoin's ability to be used as ultimate ledger, primary for notary services.
If we consider that bitcoin is not only a ledger for storing data, but new economic concept, monetary system and store of value at once?
I am not sure if we are longer in a bubble or it is just investors realized that bitcoin has potential.

[aoluain]

Now it is evident that Bitcoin price is at an all-time high. Prices have risen steeply, far too fast for my liking. I don't think such a growth is sustainable. The bubble is going to break very soon.

But what is causing such a price hype? I speculate this phenomenon is caused by the increase in the number of Bitcoin users. Hence, demand increases and supply dwindles. Thus price increases. Are there any other factors that could add to this price hype?

This is a good question. Most of the people here are so in denial that they won't even admit that this is a bubble, so it is refreshing to hear somebody who does recognize the reality of the situation.

The reason for the bubble is the nature of bitcoin investors. I wrote a post sort of related to this recently:

http://www.demoinvestor.com/articles/00000001
Organizations and fund managers on Wall Street have not begun to consider Bitcoin as a reasonable investment as far as risk versus reward goes, and rightfully so. Experienced investors prefer assets that either have a long history, or whose value can be measured by fundamental data about the asset. Bitcoin is severely lacking in both of these areas. As a result, the price is driven up and down by retail investors trying to get rich quick, who do not know how to invest. They fall into buying and selling frenzies far more easily than institutional investors would, which causes snowball effects to build up easily.

This basically describes what I believe is the reason. Bitcoin has historically consistently formed bubbles. This is because of the nature of bitcoin investors. They are retail investors who want to get rich quick. They are inexperienced and usually investing small amounts of money. They are basically just weaker hands who jump on board with buying and selling frenzies very easily.

If you read the article, you'll see that I mention a solution. The solution is that bitcoin needs to earn the trust of institutional investors. I am not sure that there is not a whole lot that can be done to achieve this other than wait.

I dont think you can compare investing in Crypto currencies to
investing in stocks and commodities. Crypto or to be general Bitcoin
is accessible to small money holders and large, anybody after jumping
through the usual security hoops can invest $50 or without any
security or identity verification for $15.

Lets see how anyone fairs out investing in bank shares with that amount!

Its because of its accessibility why bitcoin's value fluctuates and not everyone
is involved to get rich quick there are plenty of long term investors.

[densuj]

Bitcoins is not bubble but it is increasing the value of bitcoins, because many people around the who choose bitcoins
for investing into it than other instrument of Investment, bitcoins price increased because it is limited amount of bitcoins. We know the law of demand and supply that is why bitcoins is increasing now.

[bnhjui]

I don't think it's a bubble but what is happening is that smart investors are moving their portfolios away from the massive housing market bubble before it pops. Crypto is a gud hedge.

Prices are now rising too fast, far beyond the previous expectations
I think someone is manipulating the price

Isn't that too hard to manipulate the price if there is a $46,863,276,862 market capitalization now? I think that it is because media attention and more people recognize it and also many of them buy it to sell it later for more.

[lionheart78]

Well I guess RSK have something to do with this increase, aside from that Bitcoin had been in a bullish position for months now.  The big company in Japang joining the bitcoin blockchain technology, and the upcoming Australia acceptance.  This probably hype Bitcoin and bring FOMO to new investors that result in this spike in price.

Well for this newcomers are believing that this could be the break out japan and australia is a well established countries and with them joining this project many things will be expected. Just wanted to really make sure that this could go up and not just a hype always research and do your homework.

It seems you misunderstand the context of hype in there.  It is not a hype of baseless stuff.

hype1
hīp/Submit
informal
noun
1.
extravagant or intensive publicity or promotion.
"she relied on hype and headlines to stoke up interest in her music"
synonyms:   publicity, advertising, promotion, marketing, exposure; More

With all the adoption and good news about bitcoins, certainly the hype is being produced.   Hype is not a bad thing and it is needed to spread out awareness through out the globe.

[cr1776]

Now it is evident that Bitcoin price is at an all-time high. Prices have risen steeply, far too fast for my liking. I don't think such a growth is sustainable. The bubble is going to break very soon.

But what is causing such a price hype? I speculate this phenomenon is caused by the increase in the number of Bitcoin users. Hence, demand increases and supply dwindles. Thus price increases. Are there any other factors that could add to this price hype?

Are you talking about the bubble that started in 2010 at $0.10?  Dollar parity?  Or 2011?  Or 2012? 2013? 2014? 2015? 2016? or 2017?   Assuming each time is a bubble has been a strategy that makes it easy to miss gains in fiat terms.  Every time the price hits new highs (and I think Nov/Dec 2013 was an artificial MtGox created high so there have been plenty of new highs or at least 1 year highs in between) articles and people say "bitcoin bubble" this and "bitcoin bubble" that.   Anyone who thought it was a bubble at any of those times and bought (or mined) and held, has done well.  

Usage is increasing - whether it is for transactions, "digital gold" wealth preservation, hedging, trading, or whatever.  Likewise, new supply decreases at each halving, 1800 new BTC/day now, 900 new BTC/day in less than 3 years.  It is simple supply and demand which sets the price at the margin.  Sometimes people panic and the price drops from $27xx to $19xx like it did a few weeks ago and the people who panic sold at $19xx now missed out on another $900-$1000/coin.  You see posts from people who sold at any point between 2009 and now wishing they hadn't tried to time the bitcoin market.

[bitbob82]

Bitcoins is not bubble but it is increasing the value of bitcoins, because many people around the who choose bitcoins
for investing into it than other instrument of Investment, bitcoins price increased because it is limited amount of bitcoins. We know the law of demand and supply that is why bitcoins is increasing now.

the interest of the people is also a reason of increasing the price of bitcoin. but the news that we are hearing in favour of bitcoin are also causing the price of bitcoin to increase. i am sure that in near future we are going to hear more and more good news about the favour of bitcoin.

[cr1776]

I have seen people here deny that this is a bubble. Have we not learned from the bubbles of the past? In every rise there will always be a fall as was with the Tulip Mania, and this could be the Tulip Mania of our time.

I know Bitcoin gives the world some utility but surely this rise is pumped by the irrationality of people thanks to FOMO.

Every rise?  Not quite.  For example:  gold is nowhere near the same price it was 50 years ago. Ditto silver.  Ditto oil. Ditto real estate.  Ditto GE. Ditto Apple is not at its 1985 price. Ditto MSFT.  Etc.

Ditto bitcoin 2017 compared to 2010, 2011, 2012, etc.  Just because some people don't see the utility of, e.g. Bitcoin, doesn't mean it doesn't have value or is a bubble. It just means it is easier to be a critic than a creator.

[SaShiRaJaVu]

Every rise?  Not quite.  For example:  gold is nowhere near the same price it was 50 years ago. Ditto silver.  Ditto oil. Ditto real estate.  Ditto GE. Ditto Apple is not at its 1985 price. Ditto MSFT.  Etc.
Ditto bitcoin 2017 compared to 2010, 2011, 2012, etc.  Just because some people don't see the utility of, e.g. Bitcoin, doesn't mean it doesn't have value or is a bubble. It just means it is easier to be a critic than a creator.

It also makes people feel vindicated about themselves for not investing if they believe everyone else is about to lose out.

So what you are trying to tell here,is it a good thing to invest at the rate or not,i would suggest waiting for a correction before entering bitcoin,but if you have the bank roll and the confidence then you are good to go if you are planning to save for a long time,i could not see any particular bubble formation with bitcoin,they are getting more investors and that is it.

[jhonmalkon]

All the bubbles are irrational, they are based on the last fool, nobody wants to stay behind on the rise and that's why the price bursts, how good bitcoin can be divided into fractions, so tant.

[Creativity]

So far we have some analysts saying that bitcoin is totally undervalued and the true value of BTC should be at least $10000
They based this opinion of bitcoin's ability to be used as ultimate ledger, primary for notary services.
If we consider that bitcoin is not only a ledger for storing data, but new economic concept, monetary system and store of value at once?
I am not sure if we are longer in a bubble or it is just investors realized that bitcoin has potential.

You can put any value on it... But the analysts aren't the regular people! To make the price 10k/BTC, each person on the world would have to own about $24 worth of Bitcoins... You see that happening anytime soon?

I don't.

[catia]

Stocks, bonds and real estate are all at crazy high levels in the USA, Candada and much of Europe.

People are also losing faith in the USD in general, and Trump is a loose cannon.

Its an unstable world. BTC is the perfect speculative investment, even though the actual network isn't in great condition (transaction fees, slow times etc).

[Wind_FURY]

I have seen people here deny that this is a bubble. Have we not learned from the bubbles of the past? In every rise there will always be a fall as was with the Tulip Mania, and this could be the Tulip Mania of our time.

I know Bitcoin gives the world some utility but surely this rise is pumped by the irrationality of people thanks to FOMO.

claiming it is a bubble without any rational discussion and purely because price has gone up doesn't make any sense.
if it is a bubble then what do you call all those dips, small dips and bigger dips all the way up?
have you forgotten that price dropped hard not so long ago from ~$2700  to below $2000? then what was that if not a correction?

Then do you deny that this rise is abnormally fast and that its driven primarily by FOMO? Try to see the real situation that is going on in Bitcoin. It cannot scale, it is in the middle of a "scalability war" between different camps, and we are threatened with a blockchain split because of the incoming UASF this August 1.

By the way to make things clear, when I say bubble I do not mean Bitcoin is a bubble. No far from it. What I mean is the whole cryptocurrency market in general. I should have said "we are in a bubble" instead of "it is a bubble". So meaning Bitcoin is overvalued.