Cryptocurrency: Why the term bubble is often overused.
We constantly hear in the news and read in the papers that the cryptocurrency market is in a bubble, this has been said so many times that is difficult to argue otherwise. However, I think we can argue both for and against the argument that crypto is in a bubble.
The main question that should be raised is what is a bubble exactly? A bubble is usually identified as a product or market that blows up quickly and is often times overvalued. Usually, these markets due to their nature collapse to a dip (low point). While a lot of us tend to overlook the cryptocurrency market we have already seen some of the symptoms during the past years where for example bitcoin was reaching new highs and suddenly the prices got slashed by 50% or more. However, we cannot ignore that the cryptocurrency market is relatively small. The whole market is at 300 to 400-billion-dollar market cap which is relatively small if you take into account the perceived potential and value, especially if you look how big other markets are some of these are even in the trillions.
Nevertheless, it is difficult not to argue that some currencies are overvalued. There are currencies which are just being hyped or promoted by investors who just want to achieve new highs so they can sell their coins and earn more fiat money. These currencies tend to have no clear purpose or active projects behind them but are still able to bank in millions at some point.
The question for me remains isn’t fiat money in a bubble as well? We can argue this case for a lot of markets as well, only thing is that these markets are usually a lot larger and mature (hence volatility) which may get ignored. In other words, value of markets or products such as crypto or fiat money is justified as long as we deem them valuable and we acknowledge them as such. I personally think that prices and markets are justified as long as we as a community or consumers give it value.
My personal opinion is that the crypto market as such is relatively small still, however certain currencies may as well be overvalued. I do think that the market as a whole still has a long way to go, but nevertheless there are some uncertainties and the power is in all of our hands to make it go the direction we want.
The above is just a small analysis, please leave your comments below for topics you want to discuss. Also, upvote if you want more content.
Signing off,
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