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RE: Why Tulip Mania is the wrong comparison to crypto

in #bitcoin6 years ago

The main difference between the two is that, even at the tip of 2017 bubble, the level of doubt regarding bitcoin was extraordinarily high. The thing about true bubbles is that they are more powerful the more people are sure of the investment. This applied to the tulip bubble: it developed over years of price increase. The more time the price increase lasted, the more everyone was sure that it wasn't a bubble, but a natural price increase. This is always the point at which the bubble becomes dangerous.

The same happened leading up to the 2008 crisis, as is so clearly shown by The Big Short: everyone was 100% sure that there was nothing wrong with the housing market, absolutely 100%. That is the problem. The same happened in 1929, it's always the same.

The clearest telltale sign of a bubble is this absolute certainty, and bitcoin never had that. Sure, the price collapsed, but the upward movement was an organic one, when people were trying to grasp what the value of bitcoin would be. This process is still continuing. Many people in the community still believe that bitcoin will be worth not only 20k USD, but even more. That's not what happens after a bubble, when everyone realizes that everything was worthless.

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