Is Bitcoin a bubble

The answer to both these questions is yes!

If Druckenmiller were to look into Bitcoin I'm sure he would tell Soros one thing... get into this bubble quick. Now that isn't to say that Bitcoin wouldn't be worth a lot more if it were accurately priced. In fact the main reason Bitcoin is in a bubble is that when properly priced it follows the price of a bubble.

I own some Bitcoin and some other cryptos (Ether mostly but Steem as well as a few others). I put very little money into it, but it has grown to a decent size. I say this to let you know I may be biased.

I don’t know if I would call it an investment, but rather speculative ownership at this very early stage. I find the idea of cryptocurrencies appealing, and in line with the direction of recent technologies. It has a lot of practical uses, and wealth gets created in a familiar way. Anyone with historic knowledge of money/finance can see what’s coming. A bubble.

Bubbles occur anytime there is a shift in technology that is fairly foreseeable. This is due to a divergence between current and future states. Bitcoin takes this a few steps further by offering a product that is best priced exponentially with a shifting curve line (the price a bubble would take). That is you have a reducing rate of increase which will automatically constrain future supplies. These occur at foreseeable points in time leading to divergence in present and future prices at a set time/date (i.e. July of 2016). In other words Bitcoin is a continual bubble when priced correctly.
It also is a network and as such is subject to the network effect. The more people that use Bitcoin the more value bitcoin has which results in more people using Bitcoin. George Soros developed an interesting theory regarding reflexivity outlined in his book the Alchemy of Finance. Bitcoin is a great example of this (as are most networks).

Lastly, it creates and has value in and of itself. That is, no other measure of wealth is needed. Bitcoin is “money”. This is akin to John Law’s project with the Mississippi Company, or the South Sea company in Britain (or the Federal reserve :) ). Or with gold and silver mining during the gold/silver backed money periods. This in of itself would cause a bubble.
It is almost as if the inventor/creator of Bitcoin was trying to create the best asset for a bubble to exist. This is all without leverage (once you can borrow against your Bitcoin and use the money to buy Bitcoin this will go crazy).

So before you invest you should understand that it is and will be for some time in a bubble (and its also a Ponzi scheme of sorts :s). Whenever I’m asked if one should invest in a bubble that is in its early stages my response is always “I would”.

I can’t give you investment advice, but I can tell you that when you spot a bubble early if you put some money into it you will be rewarded. I would say Bitcoin is in the early adopter stage of the cycle. I would also say this has the potential to be one of the biggest bubbles of all time… and it isn’t even really started yet.
All that being said, the volatility in a market without a sufficient short market is crazy. The potential for losses are high. However, the potential for gains is staggering… so even a very small investment can result in life altering gains. I invested 20% of a paycheck (2 weeks pay) 2 years ago, and now a weeks spike gives me more than I make in a current paycheck (even after my salary increases). And my investments from earlier this year in Ethereum (invested even less… about 5% of a paycheck) is doing even better… +3,000% on almost nothing is a lot.

Would love to hear your thoughts... is this a bubble... do you buy into a bubble...