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Author Topic: [2018-06-04] If Bitcoin is a Bubble, Final Stage of ‘Panic’ on the Horizon  (Read 41 times)
Diabolov
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June 04, 2018, 12:42:41 PM
 #1

Tulip mania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels before dramatically collapsing in February 1637. Some skeptics consider Bitcoin to be the tulip bubble of the 21st century, but it’s really not so simple.

Bitcoin: Bubble or New Global Currency?
Let’s consider the theory of Hyman Minsky, the U.S. economist whose theories on financial fragility were highlighted during the 2008 collapse of the housing market. According to Market Watch, he believed that an asset bubble has five stages: displacement, boom, euphoria, profit-taking, and panic.

Under this framework, policy adviser at the Federal Reserve Bank of San Francisco, Joost van der Burgt, says that if Bitcoin is in fact a bubble, it’s likely at the beginning of the ‘profit-taking’ stage, meaning that ‘panic’ is not here yet, but is coming.

Looking back, according to van der Burgt, the ‘displacement’ phase of the bubble came in the years after the release of the Bitcoin white paper in October 2008. In those early stages, the concept of the coin was catching on, but it didn’t happen over night. Remember, Bitcoin didn’t trade above $100 until 2013.

The next phase was the ‘boom’ phase, which van der Burgt describes as follows:

“The subsequent ‘boom’ phase is characterized by prices rising slowly at first, but then gaining momentum as more and more participants enter the market, fearful of missing out.”

In this stage, fear of missing out (FOMO) saw companies attempting to capitalize on the industry by getting involved with coins and blockchain. In some cases, companies simply added the word blockchain to their names in attempts to stir up interest from investors.

Then came celebrities, like Steven Seagal and Floyd Mayweather, who attempted to get a piece of the action by endorsing newly developed cryptocurrencies. Unfortunately, in most cases, these companies with celebrity endorsements have more often that not been exposed as frauds and subsequently shut down.

Moving closer to the present, van der Burgt argues that the Bitcoin bubble entered the ‘euphoric’ stage, which he claims parallels the period leading up to the 2008 financial crisis.

“The euphoria phase is also when people start to borrow extensively to finance their investments,” van der Burgt wrote. “According to a recent survey, 18% of active bitcoin investors have financed their investments by credit card, and 22% of this group indicated that they have not yet paid off their credit card balance.”

Now, after the price of Bitcoin lost more than half its value since peaking in late-December 2017, van der Burgt believes that the market is entering the ‘profit-taking’ stage, a phase where so-called smart money begins to head for the exits, leaving only one step left before the bubble pops. “The subsequent ‘panic’ phase, should it come to that, commences when reality sets in and bitcoin’s price would substantially crash,” wrote van der Burgt.

Fortunately, van der Burgt admits that he could be wrong, and that, as we here at NewsBTC believe, the digital coin will (despite the volatility week to week or month to month) continue to rise in value. He writes:

“Then again, maybe bitcoin is different than anything we have seen before, and maybe a decade from now its market capitalization will be sky-high as it attains the status of a new global currency.”

While it is possible that Bitcoin’s rise is in some ways comparable to a bubble, it’s almost impossible to truly know. One thing worth remembering is that the coin and the underlying blockchain technology have a plethora of real-world applications (tulips, it can be said, are simply decoration), and as van der Burgt states, it could become a “new global currency.” I think that’s much more likely

https://www.newsbtc.com/2018/06/03/according-to-economist-joost-van-der-burgt-if-bitcoin-is-a-bubble-the-final-stage-of-panic-is-on-the-horizon/
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June 04, 2018, 02:59:41 PM
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Yet another idiot that doesn't realize Bitcoin has had many cycles, and this is just another one.

The attempts to draw a parallel between crypto and "tulipmania" always comes from the old-guard press, even though the Tulip Bubble wasn't even as bad as depicted - reference - https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/

The point is, no one has ever seen a currency/ecosystem boot itself up from scratch, so the influx waves of bad money being converted into good crypto like Bitcoin causes people to assume each wave is the last. It isn't. We haven't gotten anywhere near saturation on this.

I am getting tired of shitty articles written by people who have no fucking clue.

fortitudinem multis - catenum regit omnia
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June 04, 2018, 05:34:08 PM
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Everything can be. This scenario may well happen. However, after a panic and a significant drop in price, bitcoin after a while can again restore its position, not reaching already large price values. So it can happen a few times. However, after this, bitcoin is greatly increased in price will not. This will have a positive effect on it, and on the whole of the crypto currency.

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June 04, 2018, 08:26:51 PM
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The bigger picture is missing from this piece.

Bitcoin would never have been created if the central banks hadn't decided to save the fraudulent banking system in 2008. Alternate courses of action (letting the bans fail somehow, i.e. capitalism) would have resulted in an incredibly painful economic recession, if not economic & civil chaos. But it would have actually straightened things out sooner. Now we have even more sovereign debt risk, feeding into endlessly levitating markets, progressive collapse in USD demand, plus myriad political factionalism and threats of trade wars to confuse the situation further. If the politicians had had the courage to let the system fail and rebuild it in 2008, at least everyone would have been united in their dislike for the banks. I'm sure the central banks will be much happier if the world is that much more chaotic when the system fails again, as they might assume they won't be considered 100% responsible for it.

Bitcoin was an anonymous attempt at creating an accountable monetary system. And for all it's limitations, it does a considerably better job at providing an honest monetary system than the central banks have. If you're looking at Bitcoin's place in the market from the monetary and macro-economic perspectives, you wasted your breath (and everyone's time, although I fortunately only wasted a minute skim-reading the text excerpt in this post).

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June 05, 2018, 03:31:25 AM
 #5

Another not so famous guy dropping some hate on bitcoin. Where is the panic bro when you see bitcoin stabilizing on $7k and the marketcap is just staying between $320-$340 billion?  Bitcoin just keeps getting stronger as the way I see it.

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June 05, 2018, 07:03:38 AM
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The article first assumes that Bitcoin is a bubble and then tries to determine which stage you are in. When your basic assumptions are wrong, it doesn’t matter how much analysis you do, you are bound to end up with nonsense. I am getting tired of the comparison with tulips.


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June 05, 2018, 08:48:22 AM
 #7

And for all it's limitations, it does a considerably better job at providing an honest monetary system than the central banks have.
In all honesty, there are zero limitations to Bitcoin. In the short term it might look like there are certain limitations, but every parameter is set up in such a way, that Bitcoin can and will be able to last +100 years. People consider 10 minute block times to be slow, but in the future they will understand that with a way larger blockchain, and potentially larger blocks, these 10 minute intervals are actually needed to keep the network operating smoothly.

If people actually did some effort to read through the whitepaper, you can see that Satoshi didn't just drop something in the wild that should help geeks and whatnot, but it is a complete anti bank and government bomb that is made to offer everyone a viable long term safe haven.

Some fools just need to understand that there is a difference between Bitcoin's speculative market and Bitcoin (the tech) itself. The only thing worthy of our trust is the tech side of Bitcoin, everything else (the market) isn't worthy of a penny in my opinion, especially not in the short term.

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