There has been a tremendous amount of global buildup in interest in Cryptocurrencies. The latest Bitcoin’s sudden growth, recent ICOs new crowdfunding records obtained in just seconds and the discussions produced by the community have attracted the mainstream news coverage. And as it happened over and over in other previous records reached by the cryptocurrency market, some media have analized if this growth is the normal behavior of a bubble of not.
Let’s try to objectively analize by ourselves this same question. If you make a quick search on internet about Bitcoin price predictions, you can find that everybody has an opinion about what price Bitcoin is going to reach in 1 year, 5 years, 10 years…If they have something in common is that none of those predictions are even a bit similar to each other. The only thing I have seen is that all those predictions are really optimist about the Bitcoin’s price, no one is even having in mind that the price could go down, and as it is only a prediction, the chances of that happening are 50%.
I think they are not having in mind the way the technological world works, where new variables are getting in the game every single day. One year could be an eternity for a growing technology, we need to have in mind geopolitical situation changes, governments’ regulations, new competitors on board, security issues in the system…that might happen in every moment. Cryptocurrency world is highly volatile. Let’s not forget that from last Bitcoin big crash in 2014, the market needed 3 years for recovering its price.
For knowing if cryptocurrencies are in a bubble we need to look firstly for examples at stablished industries, like traditional stock markets where bubbles’ investment can quickly escalate with no significant barriers to entry as enthusiasm builds ahead of demand.
This is not the case of cryptocurrencies, It is not specially easy to put capital into the system. If you try to move any serious amount of money from your savings into an exchange, you have to go through a “Know Your Customer” (KYC) process. In addition, even after that point, there are limitations to how much money an exchange can deposit from your bank account. Then, after your deposit has been sent, you have to wait for the exchange to credit your account prior to trading.
Another interesting fact is to compare cryptocurrencies with the dotcom bubble. We can check that even if cryptocurrency is a bubble is not even close to crash if we compare it with the dotcom marketsize.
Bubble or not I think is not what matters, let’s remember also that big companies like Amazon came out of the dotcom crash. Clem Chambers recently mentioned something about this in a Forbes article:
“Massive companies will come out of these emergent technologies. The children of the cryptocurrency bubble will be colossal. Where this bubble goes is impossible to guess, how high incalculable, but the take away is: Tulip mania crashed horribly taking a large part of Dutch economic dominance with it. Yet today tulips are still big business in Amsterdam. Bubbles are a phase not the whole lifecycle of something new. A bubble is just the beginning of something big.”
IMPORTANT: Never invest money you can’t afford to lose. Always do your own research and due diligence before placing a trade.
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