Volatility Yes But No Bubble

[iamTom123]

I was searching for the topic of Bitcoin bubble and I realized that there are many articles covering the fact that Bitcoin is not a bubble and what we are seeing right now is its normal volatility spectacle.

In answer to the possibility that Bitcoin has already stalled, one analyst is categorically saying that we have to wait for the time when Bitcoin's market cap is nearing the America's money supply -- now totaling a staggering $13.5 trillion and by then we can say that there could be some pronounced plateau.

We all know that in trading, it can be up and down and there is no straight line unless a currency is already dead.  So is Bitcoin.

[magneto]

I was searching for the topic of Bitcoin bubble and I realized that there are many articles covering the fact that Bitcoin is not a bubble and what we are seeing right now is its normal volatility spectacle.

In answer to the possibility that Bitcoin has already stalled, one analyst is categorically saying that we have to wait for the time when Bitcoin's market cap is nearing the America's money supply -- now totaling a staggering $13.5 trillion and by then we can say that there could be some pronounced plateau.

We all know that in trading, it can be up and down and there is no straight line unless a currency is already dead.  So is Bitcoin.

Agreed... Sort of.

Long term wise, we are seeing a tiny fraction of whatever is going to happen in the larger scale(which in my opinion will always be up due to "quantatative easing that is issued by our government, aka inflating our monetary supply to bail out banks, financial institutions etc. and bitcoin being an asset that will never exceed 21 million coins), and it's appropriate to call it "volatility". Even if you invest now, i believe that it's going to be a good deal considering that in 10 years time it is extremely likely that btc will hit $10,000.

But even a bitcoin lover like me can't really deny the fact that a bubble is present right now. There is no way that user interest/user base increased more than 6x correspnding with the price. There is probably capital moving in from large entities into bitcoin so that they can hide their wealth away from spying eyes, but a lot of it is still speculation no doubt.

[sir.humus]

I learn Math in university, which has a strong connection to economics.
It is a known fact that every strong wave has some capillary waves,
and the stronger the wave is - the stronger and larger the amount of ripples.
So, yes, now we can see pretty big ups and downs, but it will settle down with time.

Until the next giant wave of course 

[ktabb]

I was searching for the topic of Bitcoin bubble and I realized that there are many articles covering the fact that Bitcoin is not a bubble and what we are seeing right now is its normal volatility spectacle.

In answer to the possibility that Bitcoin has already stalled, one analyst is categorically saying that we have to wait for the time when Bitcoin's market cap is nearing the America's money supply -- now totaling a staggering $13.5 trillion and by then we can say that there could be some pronounced plateau.

We all know that in trading, it can be up and down and there is no straight line unless a currency is already dead.  So is Bitcoin.

It's volatility is preventing it from going anywhere near a trillion dollar market cap. It is currently very overvalued, even if it's not in a bubble (which is still very debatable).

I wrote a post explaining how bitcoin's volatility is ironically limiting its growth:

http://www.demoinvestor.com/articles/00000001

[matrix zion]

But even a bitcoin lover like me can't really deny the fact that a bubble is present right now. There is no way that user interest/user base increased more than 6x correspnding with the price. There is probably capital moving in from large entities into bitcoin so that they can hide their wealth away from spying eyes, but a lot of it is still speculation no doubt.

Agreed on this part!

There is something going on right now. No reason for the price to do something so... Crazy.
When you look at the chart and zoom out a bit you can't help but wonder "what happened recently?"
Because right now the price is just too high. I won't believe that user interest went up so much in so little time that the price is going up so fast. There must be something inside, either a small bubble or simply a really big investors cleaning the small dips as soon as they arrive.

[rickadone]

But even a bitcoin lover like me can't really deny the fact that a bubble is present right now. There is no way that user interest/user base increased more than 6x correspnding with the price. There is probably capital moving in from large entities into bitcoin so that they can hide their wealth away from spying eyes, but a lot of it is still speculation no doubt.

Agreed on this part!

There is something going on right now. No reason for the price to do something so... Crazy.
When you look at the chart and zoom out a bit you can't help but wonder "what happened recently?"
Because right now the price is just too high. I won't believe that user interest went up so much in so little time that the price is going up so fast. There must be something inside, either a small bubble or simply a really big investors cleaning the small dips as soon as they arrive.

There will be no big differences between calling "prices are too big" and "bubble". Bitcoin prices are reaching this much big prices only because it has enough adopters to support these high prices.

So, we cannot call it is too big nor a bubble. There are people who are constantly calling bitcoin into overbought zone from the price levels $1500+ from last few months, but unfortunately bitcoin prices are proving that they were complete wrong.

In upcoming days bitcoin prices may reach $5000 range, still I believe we cannot call it is into bubble because there will be enough adopters to support by investing with bitcoins.

[BrewMaster]

But even a bitcoin lover like me can't really deny the fact that a bubble is present right now. There is no way that user interest/user base increased more than 6x correspnding with the price. There is probably capital moving in from large entities into bitcoin so that they can hide their wealth away from spying eyes, but a lot of it is still speculation no doubt.

Agreed on this part!

There is something going on right now. No reason for the price to do something so... Crazy.
When you look at the chart and zoom out a bit you can't help but wonder "what happened recently?"
Because right now the price is just too high. I won't believe that user interest went up so much in so little time that the price is going up so fast. There must be something inside, either a small bubble or simply a really big investors cleaning the small dips as soon as they arrive.

There will be no big differences between calling "prices are too big" and "bubble". Bitcoin prices are reaching this much big prices only because it has enough adopters to support these high prices.

So, we cannot call it is too big nor a bubble. There are people who are constantly calling bitcoin into overbought zone from the price levels $1500+ from last few months, but unfortunately bitcoin prices are proving that they were complete wrong.

In upcoming days bitcoin prices may reach $5000 range, still I believe we cannot call it is into bubble because there will be enough adopters to support by investing with bitcoins.

well a $2300 (to 5K) in a couple of days is a bubble without a doubt because there is no way that many investors come in out of nowhere! adoption is a slow process not something that can happen over night. sometimes it speeds up due to certain events but it won't be a big percentage.

p.s. i get your point though. people always call any rise a bubble no matter what happened that led to that rise.

[deisik]

But even a bitcoin lover like me can't really deny the fact that a bubble is present right now. There is no way that user interest/user base increased more than 6x correspnding with the price. There is probably capital moving in from large entities into bitcoin so that they can hide their wealth away from spying eyes, but a lot of it is still speculation no doubt.

Agreed on this part!

There is something going on right now. No reason for the price to do something so... Crazy.
When you look at the chart and zoom out a bit you can't help but wonder "what happened recently?"
Because right now the price is just too high. I won't believe that user interest went up so much in so little time that the price is going up so fast. There must be something inside, either a small bubble or simply a really big investors cleaning the small dips as soon as they arrive.

There will be no big differences between calling "prices are too big" and "bubble". Bitcoin prices are reaching this much big prices only because it has enough adopters to support these high prices.

So, we cannot call it is too big nor a bubble. There are people who are constantly calling bitcoin into overbought zone from the price levels $1500+ from last few months, but unfortunately bitcoin prices are proving that they were complete wrong.

In upcoming days bitcoin prices may reach $5000 range, still I believe we cannot call it is into bubble because there will be enough adopters to support by investing with bitcoins.

I don't think your train of thought makes a lot of sense

And if we follow it, it basically comes down to claiming that nothing can be called a bubble until it actually implodes. But this is a meaningless and pointless logic since, first, this completely distorts the idea behind a financial (investment) bubble (as it is understood today by common wisdom and economic thought), and, second, this is kinda retrospective thinking, i.e. you can call something a bubble only after it has burst already which makes no sense. In other words, an asset can't be in a bubble until it bursts, but if it is not in a bubble, then how can it burst?

[semaforo]

You simply can't compare bitcoin to other asset classes, because it's already pretty much functional, scaling issues aside.

    If we compare it to another revolutionary technology, say, the railroad, we can't really say that investing in railroad companies is like investing in bitcoin. Investing in a railroad compaby, I might understand the revolutionary potential of the technology, and finance a new rail line knowing it will be very profitable when completed, but with bitcoin the network already exists.

    A bubble implies didsonance between actual value and market price- for example, if everyone starts buying railroad stocks, knowing whichever company completes the rail line will make a killing, this is a speculative bubble, because these companies don't actually have anything other than their expertise and knowledge, and you can be sure not all of them will succeed.

     In the case of bitcoin, however, the network already exists and can be used by anyone, and the utility gains that it can offer are so tremendous. It is a disruptive technology, but instead of being like Uber, who disrupted the taxi industry, or Amazon in the retail sector, or Air Bnb did to hotels, bitcoin is disrupting the financial sector.

     And as I said the technology already exists, so really bitcoin remains massively undervalued, for the simple reason that people either

a) don't understand bitcoin fully

b) don't understand the global economy and financial sector

c) are not confident enough that bitcoin will be the cryptocurrency that eventually comes out on top.

[deisik]

In the case of bitcoin, however, the network already exists and can be used by anyone, and the utility gains that it can offer are so tremendous. It is a disruptive technology, but instead of being like Uber, who disrupted the taxi industry, or Amazon in the retail sector, or Air Bnb did to hotels, bitcoin is disrupting the financial sector.

And as I said the technology already exists, so really bitcoin remains massively undervalued, for the simple reason that people either

a) don't understand bitcoin fully

b) don't understand the global economy and financial sector

c) are not confident enough that bitcoin will be the cryptocurrency that eventually comes out on top.

I guess this is nowhere near enough

What makes you think that most people are going to ever understand Bitcoin? It could be argued that they don't need to understand it at all (and I would certainly agree with this), but then you simply can't make it a point in the reasons why Bitcoin is undervalued. The same is even truer to global (or local, for that matter) economy and financial sector. Maybe, only a dozen people in the world really understand how the world economy actually works (and no, I'm not one of them). So this point makes no more sense than the previous one. Your third point is outright ridiculous (no offense intended) since people just don't know or have heard about Bitcoin, let alone being confident in it

[BitcoinerXX]

In the case of bitcoin, however, the network already exists and can be used by anyone, and the utility gains that it can offer are so tremendous. It is a disruptive technology, but instead of being like Uber, who disrupted the taxi industry, or Amazon in the retail sector, or Air Bnb did to hotels, bitcoin is disrupting the financial sector.

And as I said the technology already exists, so really bitcoin remains massively undervalued, for the simple reason that people either

a) don't understand bitcoin fully

b) don't understand the global economy and financial sector

c) are not confident enough that bitcoin will be the cryptocurrency that eventually comes out on top.

I guess this is nowhere near enough

What makes you think that most people are going to ever understand Bitcoin? It could be argued that they don't need to understand it at all (and I would certainly agree with this), but then you simply can't make it a point in the reasons why Bitcoin is undervalued. The same is even truer to global (or local, for that matter) economy and financial sector. Maybe, only a dozen people in the world really understand how the world economy actually works (and no, I'm not one of them). So this point makes no more sense than the previous one. Your third point is outright ridiculous (no offense intended) since people just don't know or have heard about Bitcoin, let alone being confident in it

bitcoin needs to be made dummy proof and easy for the average joe to use it. you dont need to understand something to use it but it does have to be easy to use for wide adoption.

[semaforo]

In the case of bitcoin, however, the network already exists and can be used by anyone, and the utility gains that it can offer are so tremendous. It is a disruptive technology, but instead of being like Uber, who disrupted the taxi industry, or Amazon in the retail sector, or Air Bnb did to hotels, bitcoin is disrupting the financial sector.

And as I said the technology already exists, so really bitcoin remains massively undervalued, for the simple reason that people either

a) don't understand bitcoin fully

b) don't understand the global economy and financial sector

c) are not confident enough that bitcoin will be the cryptocurrency that eventually comes out on top.

I guess this is nowhere near enough

What makes you think that most people are going to ever understand Bitcoin? It could be argued that they don't need to understand it at all (and I would certainly agree with this), but then you simply can't make it a point in the reasons why Bitcoin is undervalued. The same is even truer to global (or local, for that matter) economy and financial sector. Maybe, only a dozen people in the world really understand how the world economy actually works (and no, I'm not one of them). So this point makes no more sense than the previous one. Your third point is outright ridiculous (no offense intended) since people just don't know or have heard about Bitcoin, let alone being confident in it

bitcoin needs to be made dummy proof and easy for the average joe to use it. you dont need to understand something to use it but it does have to be easy to use for wide adoption.

   You do need to understand it to know its value. I understand the global economy well enough to know the value of bitcoin, but yeah, I guess most people don't... I did get a specialized graduate degree in.... understanding the global economy.

  I am not knowledgeable enough about crypto tech to know if some other coin will have such clear advantages as to render bitcoin obsolete- I am inclined to think though that bitcoin is to the finance revolution what http is to the internet revolution- that it is the basis on which a whole new ecosystem will be based, and other crypto currencies will not eclipse it, but I am not sure of this.

    Bitcoin's value is determined not just by people using it- and of course people don't need to understand it to use it- it is determined by the buying volume as compared to the selling volume. When people understand what it is, they want to buy it and don't want to sell it. This goes more so when they see the relevance of a deflationary currency in todays world. The only doubt left then is if another crypto will improve on bitcoin and overtake it. If this doubt is gone, a person would certainly be all in on bitcoin, and there woulf be no reason to panic sell, ever.

[Kakmakr]

I want to take it a step further. Why stop at USD in circulation? Bitcoin is global and we should be looking at ALL money in circulation. This article puts everything in perspective for me :
http://www.marketwatch.com/story/how-big-is-bitcoin-really-this-chart-puts-it-all-in-perspective-2017-06-21 < the fattest bubble is for all the money in the world — including bank deposits — which comes out to $83.6 trillion. > The Bitcoin bubble still have a long way to go, until it reach the point where it might burst. ^smile^

And then we add a few ZERO's 0.0000000000000001 BTC  ^heh^

[Jherek]

I want to take it a step further. Why stop at USD in circulation? Bitcoin is global and we should be looking at ALL money in circulation. This article puts everything in perspective for me :
http://www.marketwatch.com/story/how-big-is-bitcoin-really-this-chart-puts-it-all-in-perspective-2017-06-21 < the fattest bubble is for all the money in the world — including bank deposits — which comes out to $83.6 trillion. > The Bitcoin bubble still have a long way to go, until it reach the point where it might burst. ^smile^

And then we add a few ZERO's 0.0000000000000001 BTC  ^heh^

Bitcoin long term is definitely going to be a terat for everyone that is involved in bitcoin.

But consider this - short term wise is bitcoin really a good investment right now? Has there really been some sort of extremely good news apart from Australia, India and Japan(just 3 countries out of the around 200 nations around the world) legalizing bitcoin? Has the bitcoin network scaled yet? Are the problems that loom over the bticoin network solved? Are there even twice as much the amount of bitcoin accepting stores around the world compared to the start of this pump? Probably not.

Fiat inflation is going to drive the price of bitcoin up in teh long term, but short term wise, bitcoin is outpacing inflation wayy too fast. Even penny stocks don't rise this fast. I wouldn't be surprised if BTC went down to $2000 before bouncing up, although that low will be an opportunity for everyone to buy in cheap coinage.

[btcney]

Without volatility speculation wouldn't be profitable so I like a bit of price bounces every now and then.

On the other end, the more money comes into Bitcoin and the market cap grows the more stable it will be volatility-wise.

See you at 1 trillion market cap! 

Agreed, volatility isn't bad at all in some cases. As long as it's not a flash crash of say, 20% of bitcoin's value in 5 minutes then i'm fine with it. By holding bitcoin you are accepting that sometimes these "black swan" events could happen though. Bitcoin after all is a relatively small currency in terms of market cap compared to all the rest of the foreign currencies.

I'm not sure about your second argument though that the more money comes into bitcoin the more stable it will be.... We're still experiencing a lot of volatility even though the market cap has more than 7x from last year.

I guess its hard to draw the line in between volatility and bubble, but right now it seems to be bubble to me.

[Ewinsane]

I was searching for the topic of Bitcoin bubble and I realized that there are many articles covering the fact that Bitcoin is not a bubble and what we are seeing right now is its normal volatility spectacle.

In answer to the possibility that Bitcoin has already stalled, one analyst is categorically saying that we have to wait for the time when Bitcoin's market cap is nearing the America's money supply -- now totaling a staggering $13.5 trillion and by then we can say that there could be some pronounced plateau.

We all know that in trading, it can be up and down and there is no straight line unless a currency is already dead.  So is Bitcoin.

Agreed. This is not a bubble what we are observing now. A bubble has to be related with an artificial inflation of demand, but as Bitcoin is being used all over the world like any other fiat currency because of the simplicity as well as transparency of its operations, there is an real increase of its demand.

[Wind_FURY]

Maybe that is the thing with bubbles, we do not find out that something is really in a bubble until it pops. We can do all kinds of analysis but only the market decides in the end.

I have made lots of mistakes before by trying to "predict" what would happen. I am wrong more than I am right all of the time. Deisik knows this and have called me out several times.  

[Chin Cheng]

We all know that in trading, it can be up and down and there is no straight line unless a currency is already dead.  So is Bitcoin.

Am i seeing this correctly,did you just say that bitcoin is dead. What is the true meaning of a bubble and how long will a bubble last,if you have an answer for that,then i will accept what you are telling is right,since no one has the right answer for the market movement ,you really cannot complain about the volatility,just imagine it is a market which is active for the past few years and it might take a long time to be a stable one.

[deisik]

Maybe that is the thing with bubbles, we do not find out that something is really in a bubble until it pops. We can do all kinds of analysis but only the market decides in the end.

I have made lots of mistakes before by trying to "predict" what would happen. I am wrong more than I am right all of the time. Deisik knows this and have called me out several times. 

This was not your major mistake

We all make wrong predictions all the time, even if we don't speak them out loud (or don't speak them out at all and just keep them to ourselves). Your mistake was bullying people who doubted your "prophecies" (which I also explained to you already). Regarding the question at hand, it is certainly the market which puts an end to a bubble but some time before it pops, its implosion becomes inevitable (i.e. it cannot just deflate, slowly or otherwise). That's why it is not impossible to find out if some bubble is about to pop (and act accordingly). In fact, it is exactly the people who are the first to jump the ship which trigger the collapse

[Kakmakr]

I want to take it a step further. Why stop at USD in circulation? Bitcoin is global and we should be looking at ALL money in circulation. This article puts everything in perspective for me :
http://www.marketwatch.com/story/how-big-is-bitcoin-really-this-chart-puts-it-all-in-perspective-2017-06-21 < the fattest bubble is for all the money in the world — including bank deposits — which comes out to $83.6 trillion. > The Bitcoin bubble still have a long way to go, until it reach the point where it might burst. ^smile^

And then we add a few ZERO's 0.0000000000000001 BTC  ^heh^

Bitcoin long term is definitely going to be a terat for everyone that is involved in bitcoin.

But consider this - short term wise is bitcoin really a good investment right now? Has there really been some sort of extremely good news apart from Australia, India and Japan(just 3 countries out of the around 200 nations around the world) legalizing bitcoin? Has the bitcoin network scaled yet? Are the problems that loom over the bticoin network solved? Are there even twice as much the amount of bitcoin accepting stores around the world compared to the start of this pump? Probably not.

Fiat inflation is going to drive the price of bitcoin up in teh long term, but short term wise, bitcoin is outpacing inflation wayy too fast. Even penny stocks don't rise this fast. I wouldn't be surprised if BTC went down to $2000 before bouncing up, although that low will be an opportunity for everyone to buy in cheap coinage.

This is the thing, even though 3 countries has just started to acknowledge Bitcoin, they are only in the first phase of mass adoption. You cannot expect fireworks within the first 2 to 3 months after a announcement has been made by these governments. Merchant adoption takes time and the same goes for word of mouth adoption. The timing was also poor, because Bitcoin has struggled with scaling during these times and slow confirmations might have discouraged new users, if they did not understand the real reasons for this. < Spam attacks >

I see Bitcoin as a Long-term investment and not a penny stock for short-term speculation.  ^hmmmmm^

[deisik]

I want to take it a step further. Why stop at USD in circulation? Bitcoin is global and we should be looking at ALL money in circulation. This article puts everything in perspective for me :
http://www.marketwatch.com/story/how-big-is-bitcoin-really-this-chart-puts-it-all-in-perspective-2017-06-21 < the fattest bubble is for all the money in the world — including bank deposits — which comes out to $83.6 trillion. > The Bitcoin bubble still have a long way to go, until it reach the point where it might burst. ^smile^

And then we add a few ZERO's 0.0000000000000001 BTC  ^heh^

Bitcoin long term is definitely going to be a terat for everyone that is involved in bitcoin.

But consider this - short term wise is bitcoin really a good investment right now? Has there really been some sort of extremely good news apart from Australia, India and Japan(just 3 countries out of the around 200 nations around the world) legalizing bitcoin? Has the bitcoin network scaled yet? Are the problems that loom over the bticoin network solved? Are there even twice as much the amount of bitcoin accepting stores around the world compared to the start of this pump? Probably not.

Fiat inflation is going to drive the price of bitcoin up in teh long term, but short term wise, bitcoin is outpacing inflation wayy too fast. Even penny stocks don't rise this fast. I wouldn't be surprised if BTC went down to $2000 before bouncing up, although that low will be an opportunity for everyone to buy in cheap coinage.

This is the thing, even though 3 countries has just started to acknowledge Bitcoin, they are only in the first phase of mass adoption. You cannot expect fireworks within the first 2 to 3 months after a announcement has been made by these governments. Merchant adoption takes time and the same goes for word of mouth adoption. The timing was also poor, because Bitcoin has struggled with scaling during these times and slow confirmations might have discouraged new users, if they did not understand the real reasons for this

India doesn't seem to be as positive toward Bitcoin as many here think

Further, you don't take into account hype which hits the price even before the actual event happens. That seemed to be a primary driver behind the recent price rally which had started at around 1,200 dollars per coin (I refer here to the Japanese government legalizing Bitcoin). Right now this hype looks kinda exhausted, and Australia removing Bitcoin double taxation will likely come off as a non-event completely. Moreover, actual adoption may be expanding when Bitcoin is correcting, i.e. it could in fact happen when the hype which was caused by its expectations is already subsiding (with prices going south)