As Bitcoin has risen from the darkness, its immediate potential has forced both the mainstream media and the financial world to stand up and notice. In 2017, the price of Bitcoin alone has seen immense profits of more than 1700%. It is that rise that made the critics calling the bitcoin bubble the largest they have ever witnessed.
To term it a Bitcoin bubble of and in itself is hard. A bubble in cryptocurrency meaning is any asset that is trading well more than its intrinsic value. The problem with an asset like Bitcoin or other digital currencies is that they do not have any intrinsic value if we talk technically.
According to the cryptocurrency enthusiasts, the fiat currencies also lack any intrinsic value. However, according to the law, the taxes in the United States are required to be paid in US dollars. This creates a demand for the US currency and therefore it gets a true value. While the application of Bitcoin at this point of time is very limited as a form of payment, crypto enthusiasts argue that the speculation of Bitcoin is something that is generating massive profits which put this crypto into bubble territory.
Bitcoin Bubble 2021 In The Latest Gold Rush
Given the lack of real value of Bitcoin, many experts compare gold which is a store of value with Bitcoin which is now seen as a digital alternative.
Fundamental investors of gold have used the precious metal traditionally as a safeguard against inflation to protect themselves from economic fluctuations. And there are some similarities with Bitcoin and that is Bitcoin also has effectively limited supply.
However gold investors also purchase gold as they think that the value of gold will increase with time. The search term “Buy Gold” is now overtaken by “Buy Bitcoin” implying an increased enthusiasm for the speculation of Bitcoin and the belief that its value will; continue to move higher.
Bitcoin Bubble Burst 2021
The 2018 Bitcoin crash also known as the “Great crypto crash” was the sell-off of Bitcoin along with other digital currencies that started from January 2018. After a bizarre boom in 2017, the value of Bitcoin fell by about 65% during the month from 6 January to 6 February 2018. There is a Bitcoin crash 2021 as well where the cryptocurrency market is witnessing a strong decline in the value of Bitcoin and other currencies after China called off all its mining sectors.
Comparison Between Bitcoin and Dot Com Bubble
In the present times, one of the greatest rallies in the market that we have witnessed was in the late 1990s in the form of the dot com boom. It was that time when the advent of the internet was altering the way we lived and the ways businesses were operated. And that was highly reflected in the technology stocks of many businesses.
The insert Bitcoin bubble in this context, US technology stocks carried a value close to 1.7 trillion dollars before it collapsed. As it stands, digital currencies are presently around 170 billion dollars, which implies there is potentially more room for the growth of the digital currency market.
Is Bitcoin Bubble A Blockchain Bubble?
The comparison between the Bitcoin bubble and the dot com bubble is obvious. It had to happen. Cryptocurrencies like Bitcoin clearly show a tectonic shift in the way currencies work. It can only be the technology on which these are formulated which is known as blockchain that is contributing to the high valuation. We are witnessing potential applications for blockchain technology in the insurance industry, banking sector, forecasting, and gambling amongst many others.
There are many experts who are betting on this blockchain technology by making investments in Bitcoin. They can see the long term benefits and future that are represented by this technology which is making a contribution to the present status of the Bitcoin bubble.
So to truly evaluate whether there is a Bitcoin bubble, depends on which side of the river you are sitting. If you believe in this technology and its application and not only as a form of payment but as a game changer then the concept of Bitcoin is likely undervalued.