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Author Topic: [2017-09-05]Nobel Prize Winner Uses Bitcoin As Example of Irrational Exuberance  (Read 5566 times)
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September 05, 2017, 09:03:42 PM
 #1

Nobel Prize Winner Uses Bitcoin As Example of Irrational Exuberance

Yale economics professor Robert Shiller won the Nobel prize for his work on bubbles. In his latest book titled ‘Irrational Exuberance’, he uses Bitcoin as an example of a market that has spiked and collapsed.

Shiller is credited with developing the identifying tools that are considered vital in picking apart frothy markets and discovering those in a bubble. He helped create indexes for measuring real estate prices and his stock market valuation indicator, the cyclically adjusted price-earnings ratio, or CAPE ratio.

Asked about a real world example that would typify irrational exuberance or a speculative bubble today, Shiller’s answer was straightforward and simple: Bitcoin.

Speaking with Quartz, Schiller explained that it is Bitcoin's story that is making him believe this theory.

The exuberant Bitcoin story


Shiller explains how he hears the whispers of Bitcoin around Yale. That makes him think this is indeed a bubble.

“The best example right now [of irrational exuberance] is Bitcoin. And I think that has to do with the motivating quality of the Bitcoin story. And I’ve seen it in my students at Yale. You start talking about Bitcoin and they’re excited! And I think, what’s so exciting? You have to think like humanities people. What is this Bitcoin story?”

“It starts with Satoshi Nakamoto. He’s never been found. That has a nice mystery quality to it. And then he has this clever idea about encryption and Blockchain and public ledgers, and somehow the idea is so powerful that governments can’t even stop it. You can’t regulate this. It kind of fits in with the angst of this time in history.

“Somehow Bitcoin fits and it gives a sense of empowerment: I understand what’s happening! I can speculate and I can be rich from understanding this! That kind of is a solution to the fundamental angst.”

Mainstream hype


Shiller comments how the knowledge of things was the real starting point of bubbles, but not so much in today’s sense of spreading the Internet say through the Internet, but more so through the printing press.

“The big thing that happened wasn’t the Internet. It was the printing press, Gutenberg in the 1400s. It didn’t really get going until the 1600s. It was then that we started seeing bubbles,” Shiller said.”

However, many also believe that the mainstream adoption of Bitcoin, and its movement into more established form of investment, is being pushed by its media attention. Additionally, it is this growth from popularity that is making the digital currency grow up, rather than inflate its bubble.

The movement of Bitcoin’s growth is also incomparable to most other bubbles, and as such, there is a belief that these traditional methods put forward by Shiller may be flawed.

https://cointelegraph.com/news/nobel-prize-winner-uses-bitcoin-as-example-of-irrational-exuberance

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September 06, 2017, 07:38:05 AM
 #2

Quote
The movement of Bitcoin’s growth is also incomparable to most other bubbles, and as such, there is a belief that these traditional methods put forward by Shiller may be flawed.

Recently, there were a lot of talks and press releases relative to Bitcoin as possible bubble that can soon pop. In fact, the recent bloodbath was predicted by a banking firm to be the start of the collapse of Bitcoin to a certain level (Bitcoin dipped but it never went down to the level that firm predicted).

So shall we then stop being involved with Bitcoin and maybe encash all the Bitcoin we got so we would not be victimized by this coming bubble pop? Or is there a possibility that all of these bubble predictions can be wrong mainly because they are comparing Bitcoin to something in the past even though the comparison is unwarranted in the first place?

Whichever you believe you can be right as nobody can predict the future 100% correct and since it is your money it is your own responsibility and right to believe whatever you want to believe.

Right?
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September 06, 2017, 08:17:18 AM
 #3

Quote
The movement of Bitcoin’s growth is also incomparable to most other bubbles, and as such, there is a belief that these traditional methods put forward by Shiller may be flawed.

Whichever you believe you can be right as nobody can predict the future 100% correct and since it is your money it is your own responsibility and right to believe whatever you want to believe.

Right?

Right, even if bitcoin is a bubble, it should not burst sharply with a loss of it`s value to zero. This asset has enormous potential for growth in future, more and more people will pour money in it. Besides, we see how smart and tricky are big whales, they decrease the price on 15 percent, to encourage and let new people jump in to crypto asset.
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September 06, 2017, 08:37:36 AM
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Recently, there were a lot of talks and press releases relative to Bitcoin as possible bubble that can soon pop. In fact, the recent bloodbath was predicted by a banking firm to be the start of the collapse of Bitcoin to a certain level (Bitcoin dipped but it never went down to the level that firm predicted).

You talking about the Goldman&Sachs analyst? Yeah he predicted the fall, but it was more on the Chinese announcement about banning those ICO that really trigger the price going down. He predicted that the bottom will go to as low as $2200 which never happened. That's why its so funny reading his prediction though, I'm pretty sure he has he's own basis, but it is flawed as well.

So shall we then stop being involved with Bitcoin and maybe encash all the Bitcoin we got so we would not be victimized by this coming bubble pop? Or is there a possibility that all of these bubble predictions can be wrong mainly because they are comparing Bitcoin to something in the past even though the comparison is unwarranted in the first place?

We have fully trusted bitcoin that most of us here really believed that bitcoin can really recover from such price crash or dip. Also, this price dip is really the best time to get and stash more bitcoin. I wouldn't sell a my coin, even dust because I just saw a price dip. Experience is really a good teacher.

Whichever you believe you can be right as nobody can predict the future 100% correct and since it is your money it is your own responsibility and right to believe whatever you want to believe.

Right?

Right, its our own money to begin with so we must used better judgement to really sell in this dip or buy more. Prediction s is only a guide, if you believe on those market analyst, it your fault if the outcome is different. That's why it is better to make your own decision based on the current facts and not go with what others have said.

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September 06, 2017, 10:29:58 AM
 #5

I have not read the linked article or looked any further into his arguments but if this:

Quote
“It starts with Satoshi Nakamoto. He’s never been found. That has a nice mystery quality to it. And then he has this clever idea about encryption and Blockchain and public ledgers, and somehow the idea is so powerful that governments can’t even stop it. You can’t regulate this. It kind of fits in with the angst of this time in history.

“Somehow Bitcoin fits and it gives a sense of empowerment: I understand what’s happening! I can speculate and I can be rich from understanding this! That kind of is a solution to the fundamental angst.”

is his core argument, then he can join Dr Bitcoin (has no clue).

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September 06, 2017, 04:11:11 PM
 #6

he can join Dr Bitcoin (has no clue).
I think you're missing his point about speculative bubbles.  He is not saying that Bitcoin is a bad idea or that it will necessarily fail, he's saying that many people investing in it invest based on the thought that the price will rise rather than proper analysis of its principles.

The way that it's comparable to the dotcom bubble is that when discussing Bitcoin, they get very enthusiastic because they feel they've come across something amazing.  What they don't understand is that they're discussing a new and experimental technology.  If it becomes used by the mainstream it doesn't necessarily have to be Bitcoin, nor does it have to be a collection of stupid and meaningless ICOs.

In the same sense, people felt they were buying into the Internet when they bought tech stocks around that time, but they weren't buying based on merit, they were buying based on the stocks' connection to the Internet and the fact that the Internet seemed to be growing in popularity.


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September 06, 2017, 06:45:03 PM
 #7

You are probably right but I have not looked further than the quote (as indicated) and what you write is a lot more comprehensive that the quote given. On the other hand, how to value Bitcoin is still out for a verdict. Even including all speculation (no discussion there), it's potential is real.

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September 06, 2017, 11:02:54 PM
 #8

I think the strategy is:  keep calling the Bubble until proved right.
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September 07, 2017, 12:21:36 AM
Last edit: September 07, 2017, 01:29:30 AM by cr1776
 #9

People have said the same thing since pre-dollar parity.  Then at $3, $7, 10, 35, 100, 500 etc.

It is like saying TCP/IP and domain names were a bubble. There is technology behind it and valid tech.
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September 07, 2017, 01:00:47 AM
 #10

What these scholars do not see is bitcoin's technical achievement as a bankless financial network. All he and people like him say is 'it is a bubble'. But what is not a bubble? Everything in the market will become a bubble.

Do not listen to him. Listen to Bill Gates. He said bitcoin is our generation's tour de force.

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