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Bitcoin: Yes, It's A Bubble And It’s About To Burst

By Jesse FelderForexJun 25, 2017 01:14AM ET
www.investing.com/analysis/yes,-bitcoin-is-a-bubble-and-it%E2%80%99s-about-to-burst-200197274
Bitcoin: Yes, It's A Bubble And It’s About To Burst
By Jesse Felder   |  Jun 25, 2017 01:14AM ET
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The popularity of trading Bitcoin has now reached the point where none other than the New York Times sees fit to declare cryptocurrencies, or more specifically initial coin offerings, “The Easiest Path To Riches On The Web.” Not to be left out, CNBC this past week published a brief tutorial on trading crypto with your smartphone and MarketWatch featured a teenage bitcoin millionaire who now forecasts a $1 million price target.

These are exactly the sorts of headlines and stories that characterize a speculative mania otherwise known as a “bubble.” For anyone who was around during the dotcom mania this should quickly bring back memories of all the folks who flocked to day-trading tech stocks. But to really understand the mania, you need to look no further than the primary argument in buying crypto in the first place. Investors here claim the value comes from the limited supply. The trouble is there is an unlimited number of types of coins that can be created!

Coin Universe Keeps Expanding
Coin Universe Keeps Expanding

Expanding Coin Universe Tweet
Expanding Coin Universe Tweet

What makes the “initial coin offering” craze that much crazier than the day-trading mania is that these are essentially nothing more than very thinly-veiled ponzi schemes. In fact, someone saw fit to to actually create a PonziCoin (at least they’re up front about it).

Now some will make the argument that it can’t be a bubble when so many are calling it a bubble. These folks should have learned this lesson during the housing bubble. The fact is it’s only a bubble once everyone acknowledges it’s a bubble. And by the time they do the game is up.

House Prices YoY vs Google Searches For Housing Bubble 2004-2009
House Prices YoY vs Google Searches For Housing Bubble 2004-2009

We’re seeing the very same thing in Bitcoin today. Crypto traders know it’s a bubble. Like every bubble (or ponzi scheme) they’re counting on a greater fool paying an even more insane price so they can realize a profit. But it looks like we may have already reached the point of maximum foolishness. Time will tell.

Bitcoin Price vs Google Search for Bitcoin Bubble 2012-2017
Bitcoin Price vs Google Search for Bitcoin Bubble 2012-2017

Bitcoin: Yes, It's A Bubble And It’s About To Burst
 
Bitcoin: Yes, It's A Bubble And It’s About To Burst

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Tazul Islam
Tazul Jun 27, 2017 1:18AM ET
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my opinion is buy dog coin which was still very low price and would be grow 10000 time within 5 years
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Jeffrey Lafazan
DuckSoup Jun 26, 2017 12:55AM ET
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Ripple...isn't a cheap sweet wine you drink from a paper bag?
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Bill Powel
Bill Powel Jun 25, 2017 6:31PM ET
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Finally, the comment regarding an unlimited number of currencies that can be created...what nonsense. First, there is a network effect wherein only several that are used as currency will hold value (Bitcoin will always be in the top 5, just like Facebook is always going to be a top social network). Second, many other cryptocurrencies are backed by actual tangible value (such as services). For example, the value of Siacoin comes from the storage solution Sia provides. Etherium provides smart contracts that are now being used by Microsoft, Samsung, JP Morgan, etc... If you do not buy Bitcoin today (and a few other cryptocurrencies) you are simply going to miss out on the single greatest wealth creation vehicle in the history of the human civilization. By the time it has mass adoption and the average Joe understands what it is and how it really works, it will be too late...
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Martin Babei
Rubberduck1973 Jun 25, 2017 4:25PM ET
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happening as we type!
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Ladi Spaqi
Ladi Spaqi Jun 25, 2017 2:49PM ET
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What about stocks they are in more of a bubble right now as they ever been..an microcaps which 90% are scaming investors with Public offering and price manipulation
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Jeff Butts
Jeff Butts Jun 25, 2017 12:25PM ET
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ICOs and the Ethererum platform are insane!  However, I don't think Bitcoin should be brought into it.  It has a very strong use case both as a store of value and medium of exchange.  If people want to trade IPOs (called ICOs to get around doing any upfront work), then it's a risk.  I utilize these currencies based on their value.  I've researched many and think BTC, LTC, ETC (Ethereum Classic) all have great use cases.  Ethereum and all of the ICO ponzis built on top of it are useless.  I tried buying some BAT (Basic Attention Token) because I like the idea and I couldn't even put it in its own wallet.  I had to change parameters on an ETH wallet. If you invest, know what you are investing in. A recent ICO didn't even have a functional coin to go with their offer.  However, I actually have the currencies mentioned above and just lost all my Litecoin because of Apple's stupid autoupdate BS. Bubble, yes.  Here-to-stay, yes.  Will it do to bank what Internet did to news? Likely.
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Joao Carlos
Joao Carlos Jun 25, 2017 11:40AM ET
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Well, every bubble is lead by people greedy and burst when people panic, there are a myriad of things that can make it either burst or inflate. The only thing precise to say is that we are always late, we read things today, trying to understand yesterday to see if it fits like happened in the past so we can figure out the future. Today i see a high speculative promising commodity. Yesterday it was insignificant.
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Electric Cars R Us
Electric Cars R Us Jun 25, 2017 10:39AM ET
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Hmm, all comments not falling for JF's article. Wait 'til Amazon starts accepting Bitcoin...game over for banks?...will AMAZON create its own crypto currency? This will be very interesting...I guess stay tuned ;)
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Jhon Mora
Jhon Mora Jun 25, 2017 10:39AM ET
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I will stay tuned for that lol...i can just inagine
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Ro Bot
Ro Bot Jun 25, 2017 9:20AM ET
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yes many can be created but only a few makes it. Ripple is one good example why it will outperform or already outperform BITCOIN in so many ways. Ripple is now being use by huge financial institutions worldwide. BITCOIN takes hours or days to complete a transaction. Ripple in the other hand only takes seconds to transfer currencies from Europe to anywhere in world and vice versa. Ripple is safer and more stable unlike BITCOIN.
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Mark Wells
Mark Wells Jun 25, 2017 9:20AM ET
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Good to know
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Jhon Mora
Jhon Mora Jun 25, 2017 9:20AM ET
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now I'm going to have to look up ripple and look into it
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blah blah
blah blah Jun 25, 2017 9:19AM ET
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this is a brand new economic landscape in its infancy. its not just a bunch of junk bonds created from giving people houses they cant afford to pay for
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Doug Holdren
Doug Holdren Jun 25, 2017 9:17AM ET
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These Central bank lapdogs want to think bitcoin is in a bubble so bad to get people nack into their system of control. Been over 126 times they cried bubble then bitcoin came back stronger. Big article on Zero Hedge.
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Ro Bot
Ro Bot Jun 25, 2017 9:17AM ET
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Yup
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Hermo Genianus
Hermo Genianus Jun 25, 2017 9:03AM ET
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I wished I could bet against it. Pondering it for weeks now.
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Danila Hiding
Danila Hiding Jun 25, 2017 2:39AM ET
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"The trouble is there is an unlimited number of types of coins that can be created!"..There are around 200 national currencies and new ones can be created at will. Unlike Bitcoin, they're also inflationary and easily manipulated and expropriated by the government as "taxes". Why are you not calling them out as ponzi schemes?
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Ro Bot
Ro Bot Jun 25, 2017 2:39AM ET
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It's decentralized. No government is presiding over cryptocurrencies. No taxes.
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Rhys Edwards
Rhys Edwards Jun 25, 2017 2:39AM ET
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Shhhhh... they're watching you.
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Jeff Butts
Jeff Butts Jun 25, 2017 2:39AM ET
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Ro Bot Pay your taxes. It is a social contract we sign. I hate cars all over the roads as the next guy, but still need to pay housing taxes (which pay for the roads, not gas tax).
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