Is Bitcoin a Bubble?

I am putting myself on a stake by expressing my opinion about Bitcoin and the Cryptocurrency market which I know so little about and I do not participate in. However, a lot of my close friends generally ask for my opinion on ICO’s and what their current holdings could do technically in a short to medium term window and have asked me to do an opinion piece on my view.

Bitcoin has been called a ‘bubble’ for the past few years. There has been severe media speculation around this bubble from well-known CEO’s dismissing it to other sophisticated investors accepting it. First and foremost, although I do believe that Bitcoin is in a bubble and the bubble will leave some wondering why they participated in the first place, I will explain why I don’t think the bubble will burst anytime soon.

The million-dollar question is when will the bubble burst? The true answer is I don’t know nor does anyone else – no matter what they tell you even if their name is Tom Hayes! This is just as true with all markets; a pullback and correction can be predicted and/or expected by using technical analysis coupled with historical data and prevalent market conditions. Bitcoin is often compared to various bubbles that have happened throughout history and are commonly fundamentally flawed in the comparison e.g. the Tulip Bubble of 1636. This is most likely due to the lack of understanding of what Bitcoin, and what Blockchain technology is. Blockchain technology is not a rare flower, it is global in scale and once implemented will provide value to society, just like the internet did when it was introduced.

The comparison of the 2001 Dotcom bubble and the Cryptocurrency bubble is a more accurate measure of the bubble that is currently forming. To put it simply, the Dotcom bubble was when investors were pouring money into Internet Start-ups in the hope of large short-term gains. The internet was a new and revolutionary technology and this got many individuals excited about the future of the interest. All in all, investors were long on anything that was related to the internet for purely speculative plays. This is similar in the cryptocurrency market, where there are hundreds of ICO’s that provide little real-world value, yet millions of dollars are raised in their ICO’s. The Dotcom bubble eventually burst when the process of regulation and commercialism took place (i.e. it became widely held among the general public), in this case, in March 2000.

What stands out for me though, is that Blockchain is only in the infancy of adoption, with some of the largest companies and countries exploring the technology and looking to implement the technology in the near future there is going to be an increasing amount of press coverage and commercialisation over the next year e.g. The Nasdaq is looking at implementing future contracts of Bitcoin. Once the general public realise the potential of Blockchain, then they will begin gambling or what they believe to be investing on cryptocurrencies and we could see an even greater rise and fall than the Dotcom & GFC.

In summary Bitcoin in my opinion is currently at the media attention stage:

Image Source: https://people.hofstra.edu/geotrans/eng/ch7en/conc7en/img/stages_bubble.png

Disclaimer: The opinion piece contains general, as opposed to personal, advice. That means it has been written for social media distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.

The piece is published by Kevin Ghazi in good faith based on the facts known to him at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. I do not make any representation or warranty that they are accurate, complete or up to date and accept no obligation to correct or update the information or opinions in this piece.

If you rely on this opinion piece, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Kevin Ghazi disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or implicitly published in or in relation to this piece notwithstanding any error or omission including negligence.