What Bubble? Bitcoin and Cryptocurrencies are Still Way UNDERVALUED!

Bitcoin just hit a new record high of $2000 per bitcoin! It has doubled in 2017! The market cap of the Bitcoin network is now a whopping $32.7 BILLION!

Is it a bubble?

Clearly a wave of new money is entering into cryptocurrencies. The total market cap of cryptocurrencies is now around $70 billion, nearly tripled in 2017. Most of it is speculation, and it's likely a short-term bubble, but that doesn't necessarily mean they are overvalued.

Let me explain.

Short-term bubbles are a common cycle for bitcoin. It goes through waves of new adoption which drives the media to comment, which then attracts new investors. Bitcoin hits seemingly foolish new highs before that bubble pops and it loses about 40-50% of its value. The bandwagon investors who never truly understood the potential of Bitcoin get scared off and the price settles to a new high well above the previous bubble's high.

After bitcoin spiked above $1000 in the 2013 bubble, it leveled off in the $300 average range over the course of two years before starting to climb again.

Even if bitcoin crashed from current highs and settles above $600 or so, that's still double the previous plateau. Any pullback in price is likely to be much less than that, and it's going to be temporary. Here's why...

Bitcoin is better, faster, smarter money than national currencies. And it is scarce. Only 21 million bitcoin will ever be created. It matters little whether or not Bitcoin becomes the preferred cryptocurrency payment network. Over the years Bitcoin has been proven to be a trustworthy network to store value without permission. Flashy new altcoins cannot make that claim, yet.

People around the world are increasingly seeking ways to protect their wealth outside of the system because when national debts explode, banks and government currencies fail, and then they impose bail-ins, capital controls and higher taxes. The dollar is already collapsing against bitcoin because bitcoiners are savvy enough to recognize this pattern. Imagine when the lay person realizes the US debt and the dollar are unsustainable?

Additionally, according to a Pew study on global remittances: an estimated 582 billion U.S. dollars was sent by migrants to relatives in their home countries in 2015. That's more than eight times the current size of the total cryptocurrency market cap, and that's only remittances. Even with slow and expensive transactions at the moment, Bitcoin is still way cheaper and more efficient than services like Western Union.

Bitcoin, other blockchain ledger networks, and tokenized services will perform many more funtions other than remittances. Therefore, in my opinion, potential for digital assets far exceeds the current market cap of $70B.

However, the potential hasn't been realized yet. The rise in price is still mostly speculation. What's more, Bitcoin currently faces management issues, scaling challenges, attacks to the network and attacks on public opinion by the media and frightened lawmakers. These are very real concerns.

Ultimately, I think there are too many parties interested in seeing Bitcoin succeed for it to crash and burn. And, in my opinion, it would have to crash and burn spectacularly for it to ever see below $1000 again. I think bitcoin will pull back soon, probably enough to frighten away some newbies, but it will blow past $2000 again shortly after that.

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