Many electronic money companies are beginning to refer to "leverage," "lending," and "credit" at conferences. This suggests to people the financial ghosts that have happened in the past.
Many financial experts and the media said that Bitcoin's recent price increase was a "bitcoin bubble". However, it is impossible to call a financial phenomenon a "bubble" as they are happening, only when it has or almost broke.
"The financial bubble is often determined by looking at the past," says William Derringer, an economics historian at the Massachusetts Institute of Technology. "We can only be sure Bitcoin is a bubble if it has been hit. broken ".
Darrin, however, said that most of the bubbles of the past occurred after the technological advances, and that new forms of finance were coming along. With the fluctuation of price in just a short time, Bitcoin has the element to become a financial bubble.
"In addition, bubbles also occur as a result of uncontrolled media coverage, resulting in the involvement of many investors. As a result, the value of the property has been pushed up too high. Compared to real value, Bitcoin is even more complex because it's impossible to tell exactly how much a cryptographic key is actually worth, "Darrin said.
Looking back, Bitcoin will certainly be one of the representative representatives for the financial 2017. Photo: Internet.
Investors today do not care about the warnings. Bitcoin prices are on the rise. The US government has even allowed Bitcoin to trade on both the CBOE and CME floors to depreciate the currency, but this legalization has further attracted more investors.
This makes it impossible to question the prospect of a "bubble" of Bitcoin being broken for some reason (hack, market manipulation, bankruptcy trading floor), what will happen and what happens. how?
Collapse on a large scale
Some people say that Bitcoin will be limited. Despite the influx of investors, most of Bitcoin's $ 366.8 billion is in the hands of a handful of wealthy people, from early Bitcoin investors to the big ones in Silicon Valley. Valley or companies specializing in money. So if the "bubble" breaks, this group of people is simply a little bit poorer.
But damage is a sure thing to happen. If Bitcoin falls sharply, this will cause companies to convert their digital money into cash, as a series of investors try to withdraw money before it's too late. And if these companies collapsed, the liquidity of the market would also weaken, causing widespread negative impacts.
The collapse of Bitcoin may entail a system of different virtual currencies. Photo: Internet.
"It (Bitcoin) is going to look like 2000," said James Bond, a mathematician at the University of Cambridge. When the market is stable, but Bitcoin trading companies will be forced to close.
The spread will occur throughout the system. Other currencies such as Ethereum, Litecoin or Monero are likely to be severely affected if Bitcoin unexpectedly falls. Bitcoin diggers are also impacted by the hardware companies, leaving many to lose their jobs.
Many economists agree that a serious collapse like what happened in 2008 is entirely possible. Many financial crises are caused by the failure of investors, leading to debt and inability to pay. Still, Hileman thinks that Bitcoin is not likely to become a "bubble", because: "For a big financial bubble, it takes a lot of different loans and credits.
"However things have started to change. Many digital money companies are beginning to refer to "leverage," "lending," and "credit" at conferences. Worth mentioning just a few days ago, the Financial Times disclosed that the BitFlyer Exchange of Japan allowed investors to lend 15 times their financial capacity to buy Bitcoin.
Bitcoin will not die
Whatever the outcome, the "bubble" will make more governments tighten regulation. As more and more people, and even Wall Street investors, are involved in the Bitcoin fever, the authorities are likely to move in a deeper way.
Tulips still play an important part in the Dutch economy today. Photo: Internet.
In fact, this has taken place: South Korea two weeks ago held a Bitcoin meeting. France's finance minister also asked the G20 to discuss and regulate digital money. "The collapse of Bitcoin will end what is happening," said Brent Goldfarb, a professor at the University of Maryland, who led the study. "This will lead to digital money regulations, like the establishment of the Securities and Exchange Commission. US trading floor after the 1929 crisis.
"If the Bitcoin "bubble" breaks, it may return to its original location, where it is for passwords enthusiasts or may be replaced by another payment method. But it will not die. Similar to the tulip blooms of the early 17th century, Goldfarb said: "Tulips do not disappear after the nightmare ends, and this flower still plays an important part in the Dutch economy. until today".