WHAT WOULD BE THE CONSEQUENCES OF A BITCHEN BUBBLE FLASH?

tighilt (49)in #bitcoin • 7 years ago

This morning we presented to you a note written by a Dutch journalist that "Bitcoin could destabilize the economy".

But is this really the case?

The existence of a speculative bubble on the Bitcoin market has been mentioned by some observers for a long time, even when the digital currency was worth only 30 cents:

But it was especially at the end of 2013 that many voices were heard on this subject, while the price of cryptocurrency had gone from 120 dollars to more than 1150 dollars in less than two months.
Mais c’est surtout à la fin de l’année 2013 que de nombreuses voix se sont fait entendre à ce sujet, alors que le cours de la crypto-monnaie était passé de 120 dollars à plus de 1150 dollars en moins de deux mois.

Although its value has appreciated by more than 1000% since the beginning of the year, Bitcoin nevertheless seems, for some, ready to continue its rise, despite many warnings from many observers, and capitalize on a growing adoption, offering a decentralized alternative to fiduciary currencies.

An article that might interest you: Is this the right time to buy Bitcoins?
But if it were supposed that Bitcoin was indeed a speculative bubble, what would be the real consequences on the economy of the bursting of it?

What are the risks for the global economy?

For starters, one might wonder what might happen to people who have invested in Bitcoin if it ever loses all of its value. But the answer is very simple: they would lose money.

But as Bitcoin holders represent only a tiny part of the world's population (they would be 45 million according to this study, or 34 to 36 million according to this one), the consequences of the bursting of this bubble may be limited.

Especially since one can imagine that most holders of Bitcoin have placed a small share of their assets in the digital asset, being aware that this was an extremely volatile investment .

Let us focus instead on the potential consequences for global finance of a collapse of Bitcoin.

What needs to be understood is that the disappearance of Bitcoin would probably have an extremely limited impact on the global economy. Even though its value has been multiplied by 10 since the beginning of the year, Bitcoin remains a support of a tiny size when compared to other asset classes.

If this infographic is out of date (the value of Bitcoin now stands at $ 191 billion, and that of all crypto-currencies at $ 340 billion), it helps to realize how much weight Bitcoin remains limited:

We can also look at this graph, more recent, which provides us with data in "trillion dollars" (or 1000 billion dollars):

For example, the residential market weight is about 850 times higher than that of all crypto-currencies.

And if we compare the latter (340 billion dollars) with the internet bubble of the late 1990s (about 5000 billion at its highest), we realize how the size of this so-called "bubble" speculative is limited .

Adrian Lee, Senior Lecturer in Finance at the University of Technology in Sydney, used the example of Australia to discuss why a fall in Bitcoin would have little impact on the economy:

"Therefore, it would not affect the Australian dollar, as no one is using Bitcoin much yet. If you think about it, there are trillions of dollars worth of trading with the Australian dollar, while Bitcoin is worth at most $ 200 billion - so it's really not much compared to the thousands of dollars. billions of dollars of forex markets. "

Moreover, we know that the subprime crisis of 2008 was linked to mortgages contracted by individuals - this seems to be different in the case of Bitcoin, since it is difficult to imagine that a significant share of Bitcoin buyers used loans to finance this purchase.

Jason Potts, professor of economics at the Royal Institute of Technology in Melbourne, said:

"There are few signs that people are borrowing money to buy cryptocurrencies. If I were a bank or a lender, I will never lend money for that reason. "

Bitcoin, as limited as e-mail in 1994

Many observers evoke a "bubble" in talking about Bitcoin, mainly because of the sharp rise in its price during the year, but also an asset whose value is not guaranteed by any government.

What needs to be understood is that the weight of Bitcoin is still extremely low, and that the adoption of digital currency is still in its infancy - it remains difficult in most cities of the world. world, to manage to settle all of its purchases in digital currency.

Mr Potts believes that the collapse of Bitcoin would not have significant consequences for world markets. He believes that Bitcoin does not yet have enough weight to constitute a bubble likely to threaten the global economy.

This is what the President of the ECB, Mario Draghi, recently said. He explained, referring to the cryptocurrencies, that it was "a rather limited risk", and not an element that, for now, would be "likely to pose a threat to central banks . "

Mr Potts compared the situation of Bitcoin to that of e-mail in 1994, indicating that we are still in a phase of "early adoption", and then say: "People who put their savings in pension funds ... they are not in this market, and they should not enter it for long. "

An article that might interest you: Crypto-currencies in 2017: a situation identical to that of the Internet of 1994?
In the event of a sharp fall in the price of Bitcoin, the "real economy" should not be affected.

"If it collapses, it would only have consequences for the people who speculate on it, maybe those who use Bitcoin, and perhaps the trading platforms that will lose money. But these platforms do not involve a lot of overhead costs, so even if Bitcoin drops, that would not have a noticeable impact, "said Lee.

Real bubbles, reserved for big markets

Therefore, it seems clear that a collapse of Bitcoin would not have any significant effect on global markets. If the Bitcoin disappeared, this will have a noticeable impact only on those who decided to invest money - and who did so knowing the risks associated with this type of investment.

At the same time, it seems that a gigantic financial bubble is being put in place on the world stock exchanges, with record valuations in the United States. This is an element that could seem even more disturbing ...