Bitcoin is a bubble (and why it is not)
Over the past couple of years, you must have noticed that some people tend to predict that Bitcoin is a bubble about to burst. A 'bubble' is referred to as an asset driven by unwarranted and exuberant market behavior, which results in a collapse. So, what's the real deal with Bitcoin, and why people over the internet refer to it as a bubble? Ever since the early days of the cryptocurrency, some people have always remained skeptical about the first crypto, which has resulted in a lie or 'false truth' about Bitcoin. In this post, we are going to make things clear for you.
The 'Bubble' History of Bitcoin
Bitcoin is a digital currency that emerged after the financial crisis in 2008. It is not regulated by a central bank, allowing users to bypass banks and traditional payment options for goods and services. Bitcoin price has been steadily growing ever since. But the primary reason most people are pessimistic about Bitcoin today is that in 2017, Bitcoin's price was at an all-time high, growing by 900% in less than a year, with its hike in value not even predictable. This has led people to question Bitcoin and what it will do to the investors if they blindly trust the cryptocurrency. The first big argument they propose is that Bitcoin isn't tangible, but decentralized, meaning it has no government backing its dealings and operations. On the contrary, fiat currencies incorporate stability since they are supported by governments and huge banks. In addition to that, fiat currencies are sanctioned and incentivized - one can use fiat currencies for official matters like paying taxes. This is not the case with Bitcoin. Different governments and regulatory bodies tend to sanction the cryptocurrencies in different ways since they don't have a concrete owner - not a single organization or a person controls Bitcoin. Some argue that because Bitcoin was the first phenomenon of its kind, it was simply inflated and overhyped far beyond measure. There were only a few investors who bought it to actually use it. Others were simply interested in flipping it up - buy low and sell high. So the argument is, that since Bitcoin does not have any strong backing of supporters who care for its well-being, its price is continuously inflated by those who just want to make 'quick profit' from Bitcoin.
So, what ‘makes Bitcoin a bubble’?
Skeptics believe that Bitcoin bubbles tend to expand after a fresh wave of new investors join the crypto market. It was experienced in 2011, followed by the same situation in 2013. What made people think that Bitcoin is actually a bubble is when the Bitcoin price reached an all-time high of $20,000 in 2017. A single BTC was valued at $20,000. This is still the record price in the history of cryptocurrency. However, it was followed by a plunge, and the digital currency came down to the lows of approximately $7300 in less than 2 months and $3200 in a year. Today, Bitcoin price is less than 50% of its all-time high. So, some people think that there will be another sudden boom that will result in the hike of Bitcoin price - and after some time it will drop again, which makes Bitcoin extremely unpredictable and hints that it’s a bubble. The price of Bitcoin is always vulnerable to technological failures. If something bad were to happen to the Bitcoin protocol, the price might be affected. Since technological glitches always happen in the industry, some people are losing faith in Bitcoin and call it a bubble. These were the arguments for the first cryptocurrency to be a bubble. However, this is only one side of the story - in the next section, we will prove that this is not the nature of Bitcoin.
Why Bitcoin is Not a Bubble?
As you can see, the internet is filled with people who are speaking against Bitcoin and other cryptocurrencies and call them bubbles. They are doing nothing but spreading fear among the crypto enthusiasts and general audience and aspiring investors who genuinely want to use Bitcoin rather than flipping it for profit. From the above-discussed topic, one fact is clear - people fear that Bitcoin's high price fluctuations will bring doom to investors’ minds and of those who are involved in the industry. In reality, the truth is that those who criticize Bitcoin are not really familiar with the crypto market and are confused about Bitcoin. Bubble theories are only accurate when they are useful, and we are happy to say that they are not. The people who claimed Bitcoin was a bubble at $20 were utterly giving you advice not to invest, same as those who claimed that it was a bubble at $200. Now you can clearly see this advice was dramatically non-useful. Indeed, if you followed the advice of the bubble advocates, you truly missed out on the opportunity to make some high profits investing in Bitcoin and other cryptocurrencies. You might remember that in 2012, Apple shares were $100 per stock, and the company was labeled a bubble, with ‘bubble proponents’ expecting it to pop. 7 years have passed, and no burst has taken place yet. Imagine those who had invested in Apple at that time. They definitely made some big bucks. So, the moral of the story is that taking advice from bubble theorists might not be the best investment decision. They only look at the worst possible scenarios and skip the fruitful benefits altogether.
What should crypto pessimists learn about Bitcoin?
Bitcoin is not a company that is prone to profitability losses, nor is it a speculation that could fall apart due to a bank or a government-induced trickery. Here’s what crypto pessimists don’t realize about Bitcoin:
- The value of Bitcoin is increasing as it is a revolutionary financial invention and not because of marketplace lies.
- The value of Bitcoin is increasing because more and more people are adopting it.
- The value of Bitcoin is increasing because the 'network effect' is in full swing.
General investors are excited to get on board with Bitcoin, and this is what is causing the Bitcoin price to rise. But don’t confuse it with the artificially inflated bubble, which stems from a 'false truth.' The price of Bitcoin will most likely climb higher with more people continuing to get involved with the cryptocurrency. As a result, bubble theories appear to be absurd and of no use. If you believe in a product, then go ahead and invest in it. How difficult is that? Stop seeking advice from people who are afraid of change because Bitcoin, among other cryptocurrencies, is really the future. Yes, there are bad and good investments, but it doesn't mean they are all bubbles. The cryptocurrency market is substantially different from the regular stock and share market. It requires proper knowledge of the industry before you can step in it. So, don't believe the bubble theories. Do your own research, and the market will reveal to you how it really works. Disclaimer: This article reflects its author’s opinion only and is not financial advice. We take no responsibility for the results of any trader’s decision or action.