Bitcoin Over $2200, Ethereum Over $180 - 3 Reasons We're In A Crypto Bubble and 3 Reasons We're Not
When I joined Steemit, in October last year, Bitcoin was playing around $1000 and there were people eager to sell at that price, considering that plateau as an all time high, a level that won't be matched soon. 6 months later, buying Bitcoin at $1000 could have yielded more than %50 profit. Amazing, right?
And I'm not even talking about Ethereum, which, at that time, was trading at around $10, and now it's over $180. I'll leave you do the math here, because I'm getting dizzy.
So the big question now is: "are we really in a crypto bubble?". As someone who witnessed - from a player position - a big bubble 20 years ago (the dot com implosion) I learned the only thing that you can learn about a potential bubble: you really never know.
Yes, there are signs, but you can never be sure.
And even if we are in a bubble, there will always be winners. Amazon is one of the survivors of the dot com bubble, for instance, and it was obviously toughen up by that process.
So, here are 3 reasons why I think we are in a crypto bubble and 3 reasons why I believe we're not. Make your own picks:
3 Reasons We're In A Crypto Bubble
1. Price Going Up Too Fast
The speed at which Bitcoin is eating up the pockets of investors is impressive, but also a bit alarming. If the trend continues, then the bottom of the pockets should be reached soon. Although there is a lot of room to grow, the speed at which this growth is happening may create some havoc along the way.
2. Technology Lags Behind The Price
Let's be honest, there are many better alternatives to Bitcoin, if we're to talk only about the speed and cost. When a transaction can last up to a few days and its price can go up to a few dozens dollars, then you think you'd be better off with Western Union. So, the surge of the price is not matched by the technology. From that point of view, Bitcoin is certainly hyped.
3. Limited Real Life Consumption of the Coins
When we look at the places where you could actually spend these coins, we don't find a lot of them. Yes, you can buy with Bitcoin on Amazon and even PiHut, but that's equally true for gift cards. And I don't see the price of gift cards rising explosively. There are also a few use cases (like Venezuela, and Japan, see below) where Bitcoin can solve real life problems, but these are relatively isolated.
3 Reasons We're Not In A Crypto Bubble
1. Bitcoin Dominance Is Under 50%
The digital coins market is not dominated by Bitcoin like it used to, 6 months ago. At that time, Bitcoin had more than 80%. Now it's under 50%. That means a very interesting thing: the investment are diversified. People are buying into much more than Bitcoin. And the fact that Bitcoin is occupying less and less space of this market, can also mean that a potential downfall will have a smaller impact.
2. The Bitcoin / Ethereum Alts Gateway Effect
If we're looking at one of the most important reason for Ethereum's growth, it has to be the ICO's. In other words, if you want to invest in other projects on the Ethereum blockchain, you have to buy Ethereum and that was probably a very important driver for the price rise. So, people are genuinely interested in altcoins, for various reasons (like distributed storage with Storj, or blogging with Steem) and the price is justified because there's real demand.
3. Japan Accepts (and tries to regulate) Bitcoin
In Japan, Bitcoin is actually a currency. And Japan is a very, very important economy of this world. If real economy processes are starting to consume Bitcoin just like they consume fiat currencies, then that's also a natural reason for the price to go up. There are also regulatory processes in the making (or so I heard) but that couldn't hurt much, as long as the core nature of the coin remains distributed and censorship resistant.
So we may or we may not be in a crypto bubble. Both options are valid.
And that's the beauty of life.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
We are in big bubble but who knows how long it will last. Enjoy and buy yourself something nice.
You are absolutely right on all 6 points, and that's why I am dizzy too. I can't explain anything right now.
I also really appreciate how you gave both sides to the same issue, rather than just promoting one... VERY nice post...
If Banks worldwide would just adopt Bitcoin and stop fighting it, Bitcoin would be over $25,000 USD already and they could take their little service fees after every deposit and withdrawal like they love to do.
If you can't beat 'em, join 'em. How long will it take for them to figure this out?
Let's wait and see :)
My main reason this isn't a bubble: Crypto currency is the future, and the entire market should be worth 10-1000x more imo. So this growth is normal in my mind.
Thanks for making it very clear and easy to understand. Good post m8.
So, do I flip a (bit) coin to decide? ;)
😄😇😄
Or we could just wait and see. And enjoy the journey.
When you say and we say (actually all of us) that (Japan accepts and tries to regulate Bitcoin), although a step in the right direction, Bitcoin or any crypto currency for that matter will not gain parity with available currencies until it allows us doing two things. (a) pay our taxes i.e. the IRS starts accepting taxes in Bitcoins or other cryptocurrencies, and (b) the banks accepts them as repayments for debt. But we are a long way from there and you are right, the volatility in the prices do it no good. As a trader I would be skeptical in accepting payments in bitcoin unless I have the ability to immediately book my dollar value on the bitcoin payment and be certain of the expected margin I am supposed to make from a trade / transaction.
Probably all of us will find this article interesting but read between the lines. They say that what Japan has done does not mean that Bitcoin has a status parallel to the Japanese Yen. To quote from the [article] (https://cointelegraph.com/news/japan-officially-recognizes-bitcoin-and-digital-currencies-as-money)
Good point with that articles, especially the quote.
I am going to continue to cry because I did not buy bitcoin 2 years ago.
I hear you :)
The question now is, in which to concentrate... buy ETH with Bitcoin, or keep adding to both.
Do how you feel, but I'd focus on alts now.
I do not believe that Bitcoin or Ethereum are in a bubble, however I am not so sure about some of the alt coins, during the .com crash people discovered that not everything ending .com was of value, same may happen with cryto currencies in my opinion.
It will absolutely happen. The coins with communities behind them, with committed devs and with enough marketplace will survive.
wow amazing bitcoin