Bitcoin biggest bubble in history, says economist who predicted 2008 crash
theguardian.com
theguardian.com
It's really hard to take someone seriously when they say the price is going to literally go to zero. It's possible to imagine crashes of 90% or even much worse for an asset like Bitcoin, but a market price of zero would suggest not a single person in the world is willing to pay anything at all for a Bitcoin. Absent a world-changing event like hashing being completely broken, the price will never be exactly zero. I can guarantee this since I myself would be willing to pay at least 1 cent for every BTC that exists, and I know that many would be eager to outbid me with that offer.
If someone is so good at calling the exact extent of this crash, then they should place a short on Bitcoin. You don't have an excuse anymore. It's on regulated markets, unrelated markets, and everything in between. If you really think it's going to zero then put all of your money in a short and make sure not to close it until it gets there. Options are also available for some investors, which should be even more lucrative for you.
You can know that bitcoin is doomed to fail, but that doesn't help you if there's a temporary price spike and you get a margin call.
But the bubble has supposedly popped many times, keep in mind Bitcoin has had crashes far greater than just 50% before (closer to 90% has happened multiple times, see https://en.wikipedia.org/wiki/History_of_bitcoin#Prices_and_...). So if this is 'the' bubble pop, rather than just another large crash, will remain an open question for quite some time.
What seems apparent to me is that all the Bitcoin miners that have invested heavily in mining equipment want to see it continue to grow. The market may only slow down once miners no longer see a return on further investment (when the increasing price of electricity + mining equipment, combined with the steady rise of hashing difficulty, no longer makes it profitable), or when the transaction fees and transaction speed become too much of an issue. In other words, it's the technical limitations that seem most likely to stop the rise of Bitcoin (in my opinion).
(this will have occurred in the scenario where a few (or few hundred) bidders matter)
How much money would World of Warcraft gold be worth when that game eventually shuts down?
How much money will any amount of Bitcoin be worth when the Bitcoin network frays apart and ceases to function?
It's true that is the price goes low enough mining would decrease significantly, but after difficulty adjustment it would still exist to a nonzero extent. Bitcoin can absolutely still function as a system even if 95% or even 99% of all miners end up quitting it over the next few years.
Bitcoin isn't. It's merely distributed and it depends on having a singular, healthy, functioning consensus network. Where that network splits you suddenly have more than one blockchain, as is the case with Bitcoin Gold, and Bitcoin Cash.
It also depends on having a healthy balance of mining power in that network so that no one entity can take control and start to dictate terms.
If all that's left is a single miner then four other miners can easily take charge of that network and effectively destroy it.
> Bitcoin can absolutely still function....
The blockchain component of Bitcoin can technically function, sure, there's no problem there, but as a unit of value, as a unit of exchange, it's functionally useless. You can't trust it, you can't use it for anything.
There is, by design, one blockchain. When that assumption fails, the network has to work to achieve consensus, and if that can't be achieved it splits. That can be fine with things like IRC networks or peer-to-peer exchanges, you can always do a messy reconciliation later, but with something that's supposed to represent a medium of exchange that's a problem.
Non-negligible value of BTC also depends on constant investment of electricity in mining more Bitcoins and companies dedicating resources to maintaining payment/exchange infrastructure
I've heard the "prevent the next Swiss bank account" thing a few times now, and it still looks like the most baldly corrupt aspect of this whole show. Actual Swiss bank accounts are still a thing people have, and are still being used by the wealthy to avoid taxes on a routine basis, and everyone knows it. But actual Swiss bank accounts have a stable legal status and no one's really going after them.
What's the difference between "the next Swiss bank accounts" and the current ones? Perhaps it's that Bitcoin is available to much less wealthy classes of people. Or perhaps the right people have big Swiss accounts and haven't gotten around to diversifying into crypto yet. But I haven't seen a good account of the difference.
Alternatively, there's PetroChina's trillion dollar valuation during the peak of the commodity bubble:
http://www.nytimes.com/2007/11/05/business/worldbusiness/05i...
And if we're not talking about more individualized entities, the mother of all bubbles goes to the global real-estate market in 2004-2006. Or, possibly, the bond market today. The global real-estate market was overvalued by tens of trillions of dollars at its peak before the great recession. That rather comical gap between Bitcoin's value at the top and the overvaluation in just the US real-estate market in the Summer of 2005, speaks to the dramatic tone of the article existing solely for clickbait.
If Bitcoin goes to zero, it will not matter very much on a global economic basis. It impacts exceptionally few people, fortunately. When the real-estate bubble collapsed, it nearly took down the global economy. That nearly bankrupted half the largest banks on the planet. It has taken until just the last few years for much of the developed world to truly recover or begin properly recovering.
But if you look at other cryptocurrencies like Etherium for example, you'll see an interesting differentiation. Not all cryptocurrency values are tied to Bitcoin. Etherium, at the time that I write this, is up 2.4% over a month ago while Bitcoin is down 37% over the same period.
So, while I do think Bitcoin especially is pretty much definitionally a bubble, crashes and volatility are the nature of the game right now. We should be careful to lump digital currency as a whole into the the same category as Bitcoin. Bitcoin was the first, but probably wont be the last and certainly isn't the best.
I think there is value in cryptocurrency that is difficult to see for many people past the black market stuff and the gambling aspect people put to it. If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way.
I'm certain there is a reason these currencies exist beyond the sketchy reasons and I'm quite sure they are here to stay, bubble or not. There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later.
It's not hard to imagine a (near) future where cryptocurrencies are a primary means of monetary transactions.
The technology is new so there are going to be hurdles but in terms of scaling and obviously a lot of speculation, but I think there are also a lot of socio/geopolitical factors that will continue to make cryptocurrencies a thing.
I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be).
> There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later.
There's not really an alternative to houses (assuming you include e.g. apartments under that umbrella). You have to live somewhere, you don't have to use cryptocurrencies.
I think a more apt analogy would be the dot-com bubble. If there truly is a use for cryptocurrencies (as there turned out to be for internet-based companies), they'll stick around and we'll see them again.
That said, I also think it's a bit dangerous to rely on historical bubbles for predicting the future here. There are plenty of "bubbles" that never recovered at all, and we just moved on to the next thing entirely. We tend to forget about them.
Venmo is great - for people in the US who only transact with others in the US. I had the same problem in Belgium - my local friends used Payconiq, which of course only works if you have a Belgian bank account.
1) I don't think that's what cryptocurrencies want to be relegated to (a forex market essentially)
2) This also seems like a way around currency controls and things like AML compliance. If that became a problem at some point, I have to imagine governments will start putting the screws on any major exchange that interacts with fiat (and to some extent they already have).
The biggest bubble in history? Compared to the mortgage and banking meltdown in 2008?
History must be short.