Comment of the Day @NeerajKA:
Coin of the Week: USD
— Neeraj K. Agrawal (@NeerajKA) February 1, 2018
Has The Bubble Popped?
With the markets in freefall, it certainly feels as though the bubble has popped and the bear market following the MtGox hack looks all too similar. To recap how this bubble played out, let’s go back to early summer 2017. Bitcoin and crypto-assets were starting to garner mainstream media attention which is best plotted with Google Trends for ‘bitcoin’.
The frenzy developed and huge numbers of retail traders flooded into the market culminating in a blow off top with the launch of the CBOE and CME futures. Many had hoped that Wall Street would continue to keep the price going but instead they crashed the party. Since the CME futures launched, the markets have been in steady decline and retail traders are exiting enmasse.
As the dust has been settling, many have taken to twitter to post their takes on the bubble and how it maps out pretty convincingly to the textbook bubble chart:
How Bitcoin's price history compares with NASDAQ during the dot com bubble pic.twitter.com/wLjU5Iplvh
— Elementus (@elementus_io) February 1, 2018
Nouriel Roubini – author of Crisis Economies – has called bitcoin the ‘mother of all bubbles and the biggest bubble in human history’
Now Bitcoin crashing below 8000, headed towards 7000. Down 60% from the peak, 40% in a month and over 10% today. The Mother Of All Bubbles And Biggest Bubble in Human History Comes Down Crashing. pic.twitter.com/jfILcrNNXA
— Nouriel Roubini (@Nouriel) February 2, 2018
The question on everyone’s minds now is when does it all stop? As greed distorts the lens of reality on the way up so does fear on the ride down. Many traders who saw bitcoin as a new paradigm of money now see it as a ridiculous fad that is akin to the infamous tulip mania.
“The Bitcoin bubble may ultimately turn out to be a distraction from the true significance of the blockchain”
As with all things, there is an equilibrium – in the case of bitcoin, the ratio of exuberant speculators that tried to make a quick buck compared to maximalists that want to realise the vision of bitcoin as a legitimate non state governed money. This ratio was out of whack and remains out of whack until a true bottom is in place, this will give us an indication as to how many people wanted to make a quick buck and how many people want to see bitcoin challenge fiat currency. Let’s hope @ArminVanBitcoin is a little off with his prediction on this bottom:
— Armin van Bitcoin ⚡ (@ArminVanBitcoin) February 4, 2018
FT Has A Balanced View On Bitcoin?!
The FT is known to have a pretty dim view on bitcoin and cryptocurrencies and have been calling it a bubble since they first started covering the space. The ‘ICOmedy’ series slates ICOs and the ludicrous sums of money they have been raising. However, @kadhimshubber broke the trend and wrote a somewhat balanced article on bitcoin titled ‘Nobody puts bitcoin in the corner’.
The two key takeaways is firstly that the amount of ‘dumb’ increases proportionally with the price and secondly that bitcoin is a significant invention and its implications are profound:
“The problem of transferring or holding value digitally without permission is not a trivial one. The fact the solution requires huge amounts of energy is just one sign of the difficulty.”
Bubbles aside, pandora’s box has been opened and there will undoubtedly be a portion of society that will suffer the extreme volatility, poor functionality and ownership risk to store their wealth in a monetary system controlled by code rather than governments. The implications of this are huge, regardless of the short term boom and busts.