Is Bitcoin a bubble?

The price of Bitcoin has fallen by 20% over the recent weekend and many investors are wondering if this is the beginning of the bubble bursting just like it was in 2017. Many other investors think that this is a correction which is healthy for the long term price of bitcoin.

I think that crypto is a bubble in general but I also think that Bitcoin is the outlier, I believe that Bitcoin could be sustainable long term. In my recent posts you will probably be able to tell that im not the biggest fan of bitcoin even after profiting indirectly from it, but I think there is some sense for the long term goal of bitcoin but I can’t help but think that this long term ambition of Bitcoin is somewhat tarnished by its speculative nature.

Let me explain why I think this, firstly, the idea of decentralised transactions is very appealing for the future as it means business can be done quicker because the transactions are done between 2 people, as opposed to 2 people and each persons bank. This means that jobs and sales can be done via smart contracts, whereby person A will but out a smart contract saying, if you (person B) can do xyz within 1 week I will pay you X amount of bitcoin for doing so. This also makes processes such as buying houses much easier. I want to buy someones house, they tell me how much bitcoin they want for it. We go through the legal proceedings and exchange the bitcoin. These processes will be accelerated by the use of Bitcoin which I believe in the long term we will need for two reasons, the first reason is because it means we can turbocharge the economy by being able to undertake more economic processes within the year.

Secondly it allows us to be able to advance the human race – mainly for developed countries with the correct infrastructure – however once every country has the bare minimum infrastructure it allows the human race to have a global currency that is useable anywhere, meaning that global trade will become turbocharged. The only problem with this is the monetary policy trilemma, as countries that control and manipulate their currencies at the moment won’t be able to have that privilege with Bitcoin because it is decentralised.

I think this quote by legendary investor and bank breaker, George Soros, sums it up nicely: “Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend. When a positive feedback develops between the trend and the misconception, it sets a boom-bust process in motion. The process is liable to be tested by negative feedback along the way.”

What I interpret from this quote is, the underlying trend that prevails in reality is the idea of digital currency and the power that can give people in the future. The misconception is that it’s going to make everyone rich. Which shows that cryptocurrency is a bubble but the main underlying trend that prevails, could be Bitcoin.

Tell me what you guys think over at my instagram @xelafinance.


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