Why Botcoin is not a Tulip Bubble (but may still be a bubble)

in bitcoin •  last year

A few weeks ago every big news media is calling bitcoin the new Tulip bubble. But is it?

The first time i started to read things related to bitcoin was around the middle of this year (July or August) when Bitcoin were around the 6k mark.

I don´t really remember why, but two weeks ago i started to dig deeper on this world, (even bought a little bitcoin to do some experiments) and everywhere the discussion about bitcoin being a bubble or not.

And one of the most used arguments is the Tulip bubble.

Almost everywhere i read, they showed this graph:

![1500577728_goudatulip.JPG]
()

It indeed looks a lot like the bitcoin graphs in the last days.

For those that still dont know the history, around 400 years ago, the Tulip prices started to increase really fast, and everyone started to buy tulips, or plant tulips expecting its prices to keep rising and to make a fortune. After reaching a peak, suddenly there where too much tulip on the market, and the prices dropped dramaticaly.

And now, everywhere there is people saying that the Bitcoin is just the "modern tulip"

But there is one big flaw on this argument: Some of them even wrote that Bitcoin can be created forever, and that is where they dont get it.

The big difference about the Tulip mania bubble and the Bitcoin is exactly that: tulips could be produced forever, and with time, when tulips died and whitered, there were more to replace them being produced, so the supply could rise indefinitely. And what is the most basic economy law? Supply and demand. As seen on below chart, as supply increases, and the demand stays the same, the prices go down.

1024px-Supply-demand-right-shift-supply-he.svg.png

With Bitcoin the supply/demand goes the other way. There is a limit to how many Bitcoins can be produced, and as time goes by, there is still a lot of bitcoins to disappear. There is some studiess claiming that 3.8 million bitcoins are already lost forever (https://www.digitaltrends.com/computing/30-billion-lost-bitcoin/). And since there is only around 5 to 6 million Bitcoins to be mined, we are really close to the maximum Bitcoins circulating.

That is exact the opposite to the Tulip Mania. The supply of Bitcoins will only decrease after reached its peak (more lost coins than there is to mine), and since the market cap of the Coins market is only a very small fraction of the total world money, so yeah... Bitcoin can reach the 100k mark (or more)

But there is the other side: What about the demand of bitcoins? It is pretty high right now, as it reached the 10k mark and everyone is talking about it, so more and more people want to buy bitcoins as the big thing on the financial world.

What if, in a few years, Bitcoin and the other cryptos dont find any real world uses? Demand goes low, price drop real quick.

And i think that is the true breaking point for cryptos. If in the end, no real world uses (or no one believe in it), then its price will go back all the way where started.

My final thought is: If the cryptos really reach its goal, it wont be the bitcoin that we will be using on our daily lives (scalability problems, etc), but its value will still be high, because it will be the standard for cryptocurrencies, as gold is (or was) to fiat currency.

That is my 2 cents.

PH

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