Bitcoin Bubble Still in Early Profit-Taking Stages, Economist Argues

Francisco Memoria
  • Joost van der Burgt, a policy advisor at the Federal Reseve Bank in San Francisco, has recently argued the bitcoin bubble is still in a profit-taking stage.
  • Per the economist, the next stage will see panic set in as the bubble pops and the price crashes.

Joost van der Burgt, a policy advisor at the Federal Reserve Bank of San Francisco, has recently argued that if bitcoin is indeed in a bubble, it’s still in its early profit-taking stages, and panic is set to follow, according to MarketWatch.

The policy advisor’s point of view uses economic fragility theories from the late US economist Hyman Minsky, who defended an asset bubble has five states: displacement, boom, euphoria, profit-taking, and panic.

Per van der Burgt, bitcoin’s displacement phase came in the years after its creator Satoshi Nakamoto released the white paper, as it wasn’t well-known and started propagating thanks to bitcoin evangelists. The cryptocurrency only traded above $100 in 2013, and even then it had minimal trading volume.

The second phase, to van der Burgt, was characterized by the cryptocurrency’s price rise. He wrote:

“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.”

Joost van der Burgt

That fear of missing out (FOMO) saw companies add blockchain-related terms to their names, which saw their shares surge over speculation. Further, the economist argued, various celebrities started jumping in on the cryptocurrency bandwagon by endorsing various ICOs. Some projects, like Floyd Mayweather-endorsed Centra Tech, were exposed as frauds.

As the cryptocurrency started surging thanks to all the hype created, it entered the euphoric stage, which reportedly has direct parallels with the period leading up to the 2008 financial crisis. Van der Burgt wrote:

“The euphoria phase is also when people start to borrow extensively to finance their investments. 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.”

Joost van der Burgt

Now, the flagship cryptocurrency is entering the early profit-taking stages, the policy advisor said. According to CryptoCompare data, the flagship cryptocurrency surged from little under $1,000 to nearly $20,000 last year, and has since plummeted to a $6,800 low. At press time, bitcoin is trading at $7,715 as it started recovering.

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Per Minsky’s theory, this stage sees so-called smart money abandon the market, right before the bubble pops and panic sets in. That happens, van der Burgt stated, when “reality sets in” and bitcoin’s price crashes.

The economist acknowledged, however, that he could be wrong, and that the flagship cryptocurrency is different than anything we’ve seen before. He said:

“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.”

Joost van der Burgt

Various bitcoin bulls seemingly believe this second theory, as their price predictions fall in line with it. Cybersecurity pioneer John McAfee, for example, has stated one bitcoin will trade at $1 million in 2020. Fundstrat Global Advisors co-founder Tom Lee, one of the first Wall Street analysts to cover the cryptocurrency, sees it hit $25,000 by the end of the year, and $91,000 by March 2020.

'Big Spender' Bitcoin Wallet Exploit Is an 'Issue With BTC Itself', Says BCH Supporter

Michael LaVere
  • Crypto security firm ZenGo has identified a double-spend exploit dubbed "BigSpender" which affected popular bitcoin wallets.
  • Exploit allows an attacker to cancel a bitcoin transaction without the receiving user knowing. 

A crypto security firm has identified a double-spend exploit targeting popular bitcoin wallet providers. 

According to a report by ZenGo, the security firm has discovered a double and multiple spend wallet exploit for bitcoin dubbed “BigSpender.” The report claims the exploit allows an attacker to cancel a bitcoin transaction but still have it appear in a victim’s vulnerable wallet. 

The report reads, 

The core issue at the heart of the BigSpender vulnerability is that vulnerable wallets are not prepared for the option that a transaction might be canceled and implicitly assume it will get confirmed eventually.

As CryptoGlobe reported, ZenGo found that a user’s balance would be increased following an unconfirmed incoming transaction, without a subsequent decrease in the event the transaction being double-spent. The firm outlined how an attacker could use the exploit to cancel transactions of sent bitcoin while still receiving goods and services in return. 

The security firm tested nine popular cryptocurrency wallets and found BRD, Ledger Live and Edge to be vulnerable to the exploit. All three companies were notified by ZenGo of the threat and subsequently updated their products. However, the firm noted that “millions” of crypto users may have been exposed to the attack prior to the update. 

Bitcoin Cash supporter Hayden Otto told Cointelegraph the exploit is particularly concerning for bitcoin-accepting merchants. 

He said, 

The technique is facilitated by RBF (replace by fee), a so-called ‘feature’ added at the protocol level by the Bitcoin Core developers.The issue exists if you use BTC. Wallet software can only make some trade off, which results in a worse BTC user experience, in order to try to protect BTC users.

Otto claimed the exploit was derived from “an issue with BTC itself” and had little to do with wallet software. 

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