UNDERSTANDING THE PERVERSITY OF THE BITCOIN BUBBLE

Just type "bitcoin" in Google to achieve what interests users. The first three ads are: "Buy and exchange Bitcoins easily without wallet", "5 Best Bitcoin Brokers 2017" and "How to buy Bitcoins". Formerly reserved for a techie community, the subject has crossed the border of the general public. Many have already invested in cryptocurrency or intend to do so shortly. In a recent issue of "Complément d'enquête", France 2 was interested, for example, in students looking for easy money or young demotivated executives who scrutinize the price of this currency throughout the day.

This enthusiasm for Bitcoin is the consequence of its incredible flight since the beginning of the year. From 1.000 euros in January, it is currently minting around 5.500 euros, with a record at 6.513 euros on November 5th. And all indications are that a new outbreak of fever is looming: the Chicago Stock Exchange will launch by the end of the year futures on this virtual currency, which should expand the base of investors and potentially boost its value.This folly is also noted on the "ICO" (Initial Coin Offering), a way for start-ups to raise funds in bitcoins without necessarily selling shares. Investors get "tokens", a kind of promise to receive a product of the company once it developed! This activity has already been the subject of hundreds of frauds and no regulatory authority has so far agreed to frame it: investors lend money almost too easily! According to CoinSchedule, 2.92 billion euros have been raised in this way since the beginning of the year.
Beyond the speculative frenzy, what makes the fundamental attraction of Bitcoin? Three arguments are put forward by the users of the first hour: the bitcoins exist in limited quantity (each new unit is created after a complex computer calculation and their total number is limited to 21 million); traditional currencies no longer inspire confidence at a time when central banks are pursuing easy money policies; Bitcoin allows for quasi-anonymous transactions.

Except these arguments do not explain the recent madness around bitcoin. Other more technologically advanced cryptocurrencies have appeared in recent years without experiencing the same speculative flare. Of course, several sectors, including finance and insurance, are interested in blockchain technology (the underlying digital registry that records all transactions), but the existence of a virtual currency is in no way essential. to its operation. No, investor interest in bitcoin is only motivated by the rapid increase in value. This is called a bubble.

And as for all bubbles, it will eventually burst. And there will be a lot of losers.