I came across an interesting article from businessinsider about Bitcoin being in a bubble.Before going into more details , we will discuss about what exactly is Bitcoin and Cryptocurrency
What is a cryptocurrency?
According to wikipedia: A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets.Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, numerous cryptocurrencies have been created.
What is exactly Bitcoin about?
According to wikipedia: Bitcoin is a worldwide cryptocurrency and digital payment system called the first decentralized digital currency, as the system works without a central repository or single administrator.
It was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.
The system is peer-to-peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain.
A bubble happens when the price of the asset goes up without any fundamental explanation.
Why is the price of Bitcoin and Ethereum going up?
According to business insider bitcoin has surged 162% in very volatile trading this year amid continued demand. But as the chart below illustrates, bitcoin’s longer-term rally by as much as 1,000% was swifter than homebuilder stocks in the lead up to the housing crash.
Below is a graph explaining about the characteristics of bubble which is a price increase of 1000% or more during a 10 year period.
Well, is it cryptoccurrency in a bubble or not? That is hard to tell. To be honest, it is quite different from the other types. If we look at the graph that I showed you, then we may say that YES, it is probably in a bubble.
This is a commentary article from the business magazine article.
Please do let us know on the comment section whether or not you think that bitcoin is in a bubble.