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Bitcoin is the modern day Tulip mania!

Bitcoin is in a bubble. When something becomes this popular in such a short amount of time, that's a sign of a bubble about to pop. Don't give into the Bitcoin madness! Educate yourself before taking such a risk!

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Bullshit.

For one - tulipomania started out as a status-symbol thing. People liked to show off their rare varieties as collectors of anything rare like to do. Bitcoin owners don't go around showing off their wallets to people for glory.

2nd - tulip bulbs were never fungible. A half, or a quarter, or .0001895 of a tulip was never worth anything, whereas .005385 bitcoin has value.

3rd - tulip bulbs could not be easily transported from place to place electronically.

4,5,6, whatever. It's a stupid comparison.

Don't feed the pandas. Ever.

Bull markets climb a wall of worry

From a purely trading perspective, everyone and their dog is calling Bitcoin as a bubble. The people who see value in Bitcoin are certainly the minority. In most real bubbles, only a very small group sees the bubble. I remember how everyone during the housing bubble thought I was crazy for telling them it was going to crash someday. This doesn't feel like that... yet. The contrarian position would be to buy Bitcoin at this point. We had a 50% crash a week ago which has retraced most of the correction.

In any Bull market you have 3 phases.

Phase 1 - early adopters (the early bitcoin miners)
Phase 2 - smart money (professional investors and hedge funds)
Phase 3 - The common man enters the market in droves (characterized as a blow-off top usually)

We're basically somewhere in phase 2. Lots of investment firms and hedge funds are now looking at bitcoin and taking small positions. This thing could run quite a way before it get's too extreme. The fact that everyone is calling this a bubble, makes it very likely that it's not.

bubbles

You write that "In most real bubbles, only a very small group sees the bubble" but that's only true very early in the formation of a bubble. By the time people were saying that the housing bubble was a bubble, the bubble had started to pop. A minority of diehards were saying that it was "just a correction," but in reality it was downhill from there. The same was true with the dot com bubble. By the time the consensus was that any of the dot com bubble stocks was in a bubble it was only after it was too late to rationally deny it.

Just to be clear, I'm only saying that I think your argument doesn't work the way you want it to work. I have no idea whether bitcoin has peaked or not, but the way it usually works out is that the consensus that something is in a bubble is a lagging indicator.

Bitcoin NEEDS to have unique, cutting edge, nonconventional

technology and security in order to have an excuse for ridiculous gains. It needs to have lore behind it "It CAN'T be confiscated or taxed. It can be used over the internet without government involvement.... blah, blah, blah" to have any excuse for increasing so rapidly in value. Every bubble and especially Ponzi scheme needs something unique.

Nobody is going to buy "Bill's Super Duper Don't Ask Any Qustions I Will Return 100% Interest On Your Investment Just Don't Ask Questions, Ordinary Trust Us Bonds" or anything else that smacks of a Ponzi Scheme.

There has to be something unique this time to support the dreams. And bitcoin has that.

Whereas:

M1 money supply in virtually all currencies has gone parabolic.

Gold and silver - the normal barometer for lack of faith and/or fear of government monetary systems is being violently suppressed by the BIS, FED, Treasury, and central banks around the world.

The high-end art market has exploded as well as the high-end diamond market.

Inflations of the past have always demonstrated that newly printed money enters the economy unevenly at uneven rates. This trait causes high inflation in certain items like food or geographies like China, where other areas experience "disinflation". Inflation also has a malicious effect in causing malinvestment in "hard" assets or assets out of the reach of schitzophrenic governments.

Given all the above, why is anyone suprised that Bitcoin is on fire? It's a small market cap system that's sole purpose is to circumvent the parasitic banking system. During hyperinflation, some assets do better than others. Just as gold and silver should outpace inflation in the long run, Bitcoin could provide orders of magnitude higher upside than the inflation rate.

So, back to the question: Is Bitcoin a bubble?

Maybe, maybe not.

Could it go to $1M per Bitcoin in this inflationary environment?

Absolutely.

I suggest Taleb's barbell strategy. Put most assets (80-90%) in absolutely safe assets like gold, and save a little for highly speculative and possibly explosive assets like Bitcoin. Don't miss the forest for the trees. It's inflation, Bitcoin is highly inversely leveraged to inflation and the banking system corruption. I say it's a buy, in moderation.

Whenever you invest in something you have to consider how

you will get your money back. Who to and where will you be able to liquidate the asset?

High end art, high end diamonds and high end real estate are all increasing because RICH people (who are the only people who can afford them in the first place) are convinced that OTHER rich people will be willing to take them off their hands.

People only invest in these exclusive assets when they think the economy will be peachy for others who are well off.

Spending time studying hyperinflation, I don't think so

The Chinese and others are buying property in London, Detroit and other cities in order to get rid of dollars. The super wealthy know what is going on and they're buying art and other assets as a protection against inflation. Certainly there are some that are hoping to turn a nice profit, but many, most are trying to protect their assets.

This is textbook early stages of a large inflation. It's not exactly a secret. Even fascists like Warren Buffet have stated that they expect to see double digit inflation coming down soon.

Diamonds, Art, Gold, Silver, Antiques are all historical inflation hedges and a pretty good warning sign of a new inflationary environment.

The two main drivers in a market are greed and fear. Right now it appears there's a bit of both. Most of the new bitcoin volume is coming from Asia, not the US.

NOTHING that goes from 9 cents in 2009, to $1000.00 four years

later - ISN'T a bubble.

Incorrect...

Facebook,
Twitter,
Groupon, and about 100 other technologies have done the same...

It is pre-IPO so we dont get to watch the market price, but in actual fact it is quite common in the technology space.

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Protect your assets and profit from the greatest wealth transfer in history.

Those companies increased in value because people began using

technology en-masse. Huge amounts of revenue could be generated by such usage and exposure.

The only exposure bitcoin is getting is BECAUSE it has increased in value so rapidly - not the other way around.

While everyone has heard of bitcoin now - few actually own them.

Widely used social internet companies that increase in value because everyone is using them - are not the same as bitcoin which is increasing in value because people hope it will continue to increase in value (speculation).

If my math is right - bitcoin has increased by ....

11,000 times since it was 9 cents.

People are buying it more for speculation than for spending as there are few real legitimate ways to spend it. (I said "FEW", not "NO").

If you buy it now and expect it to increase in value the same way during the next four years - each bitcoin will be worth $11,000,000 (eleven million dollars) by 2017.

Don't hold your breath.

Sooner or later people will realize that ridiculous returns are not in the offing in fact they will realize that the only thing keep bitcoin hyper-valued at all is that others expect it will hyper-appreciate in value.

As a few get discouraged the value will fall slightly and people will run to the exit to keep as much value as they can.

Buy them if you want to. Hope for each to be worth a cool eleven million in four years - and come back to hear me say "I told you so." when it crashes.

And by the way - like a Ponzi scheme - those who got in first are going to make out like bandits if they get out like they should now. Those who didn't get in at first will be left holding the bag.

"few real legitimate ways to spend it"

The easiest way to buy anything on the Internet using Bitcoin.
https://www.joinsnapcard.com/index.html

BitPremier
http://www.bitpremier.com/

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Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
#standwithrand

This is the modern day bitcoin naysayer. :)


http://youtu.be/JUs7iG1mNjI

www.SuccessCouncil.com
Protect your assets and profit from the greatest wealth transfer in history.

Yeah and in the 1950's and 1960's Popular Science and Popular

Mechanics predicted that by the year 2,000 everybody would have helicopters parked in their garages. Nobody would drive cars anymore.

How did that work out?

You're right, but not in the way you think

The tulip bubble like all bubbles was a result of monetary manipulation as summarized here on mises.org.

Although essentially in reverse, and more complicated, but the short version is before the tulip bubble, specie had been restricted and the exchange rate was artificially high. When the restrictions were lifted there was a flood of specie, which caused asset prices to rise and specifically tulips.

So yes, the price of btc is artificially high because of the instability and danger of holding fiat currency. Unlike the tulip bubble however the danger of holding fiat currency will not abate.

The tulip bubble was a result of an acute inflation of the money supply after it had been artificially constricted. Gold specie being now legal, flooded in, but once it had done so, that was it.

The btc 'bubble' is a result of chronic inflation of the money supply. So this bubble will not pop on it's own. There will be corrections, but the reason for btc value is government monetary manipulation, and that manipulation will not stop.

There are only three ways btc can lose value, central banks figure out a way for their nation servants to shut it down by force, they get used so much that the infrastructure cannot support blockchain transmission, or a competintg currency gains sway. Obviously if precious metals were legalized as currency btc would have issues.

How likely, and when, you think those will happen is an exercise for the speculator.

It should be noted that right now competing digital currencies actually are an upward force on btc. Alternate digital currency miners typically immediately exchange newly mined coins for btc. So this drives btc up and other currencies down. That could change quickly, if some exogenous shock impacted btc credibility as a positive store of value.

The answer to fiat currency governement manipulation and

maintaining value is LAND. True real estate values can be affected by bubbles. But land is a good wealth store. It has utility and value almost without regard to economic conditions.

The problem is that land is not portable. If you want something portable with a great history for being a store of value - go with gold. But of course it can be stolen, lost or confiscated more easily.

Bitcoin is a high tech novelty.

bubbles

The btc 'bubble' is a result of chronic inflation of the money supply.

If the dollar were sound, so that all dollars (even the ones represented only electronically) were backed by gold, then demand for crypto currencies might not be zero but it would be greatly reduced. So it's certainly fair to say that a lot of the value seen in crypto currencies is a direct consequence of the chronic inflation of the money supply. But that doesn't answer the question about whether the bitcoin price is bubbly.

The current price of bitcoin is partly because of demand for its current, actual utility, and partly speculation about future demand that hasn't materialized yet (and may never materialize which is what makes it speculative). It's possible for speculation to be over-enthusiastic about future prospects and under-cautious about risks, and that can create a bubble in pricing. Certainly that was the case with a lot of dot com stocks during that bubble, which is a much more accessible point of comparison to bitcoin. Whether or not it's currently true of bitcoin is a question worth considering.

Agreed on all points

It's helpful to be able to disambigute the various factors of btc valuation. It's not so helpful that I would advise specualtion either way based on that mere understanding:)

In general it is exactly because bubbles are largly caused by policy that they are so hard to predict. Because you can't predict the policy. How agressively will they go after bitcoin? When will the fed be forced to stop printing? When will competing central banks stop soaking up our inflation? When will the EU debt crisis play out and then, due to being a better risk that US debt, force US treasury yeilds up?

It's far easier for people in agriculture futures to predict the weather, than it is for us to predict what central banks and governments will do, or be forced to do, and when they will do it.

Bubbles caused by policy

Policies can affect pricing, certainly, but I'm skeptical about "bubbles are largely caused by policy." Loking back at the dot com bubble I don't think that webvan's eight billion dollar market cap, just to pick one convenient example, had anything to do with policy.

In the case of bitcoin, it seems to me that government policies are a net downward pressure on bitcoin, such as China's decision, and the EU today. The positive pressure on the bitcoin price is mostly speculation about what it might be used for in the future, and the demand that could potentially create. The speculation is, for the most part, wildly optimistic about the future prospects and dismissive of the risks, just like the good old dot com days, which is why bitcoin seems so bubbly.

The Coiners' Argument Summed up

Our con currency is better than the dollar because we LIMIT the number of bitcoins in our game. In our game you have to "mine" coins using a lot of electricity to solve math problems that don't need solving.

Using the strong point of the coiner argument, anyone can therefore invent any number of currencies as long as they limit supply based on any useless activity.
Why not:
-a currency supply limited by how many times a set group of people can run around the block in a given city in three years.
-a currency supply limited by how many times the President says "ah" during the remaining term of his presidency

Unbacked currencies are simple to create as their value is created out of thin air backed by people running around telling people to join the "revolution" and to be branded "statists" if they don't believe the hype.

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you should try to create your own currency then Smaulgld

and see if the market will reward you. It is surely rewarding Bitcion right now.

The Red Coats are coming!

the market rewards many things like

petrocks, pets.com and beenie babies.

the market also punishes goods and services via competition, loss of interest or credibility.

If people want to place value in a computer mining game like Bitcoin they have every right to do so.

People also have the same right NOT to believe there is any value in invented crypto currencies.

Bitcoin will not become a wide spread currency if it is presented to the world as anti NWO and Anti Fed as most people don't even know that the Fed exists

Widespread voluntary use of a currency will come from trust in it. Labelling non bitcoiners as "chinese regulators" and "against freedom" won't gain adherents to the bitcoin game

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It's economics

People will use Bitcoin because it's cheaper than an international money wire through the US controlled SWIFT system. Organizations like Wikileaks can't have their funding sources cut off when they use Bitcoin as the payment system. Think whatever you like about where the value per bitcoin will go, but economic laws tend to argue that Bitcoin is a disruptive technology that has some legs.

Countries suffering under sanctions, or more importantly, people living in countries suffering from sanctions can transact with the global marketplace, until a blockade is put in place around their country. Capital controls can be escaped. Asset siezure can be escaped. And you don't even have to keep your money in Bitcoin. In conducting these transactions one only needs to hold them for a few seconds.

Bottom line is: People will use Bitcoin because it's cheaper than options within the banking system.

"People will use Bitcoin

"People will use Bitcoin because it's cheaper than an international money wire through the US controlled SWIFT system."

it's not cheaper if after transferring your bitcoins the price drops by half before you get a chance to spend your bitcoins.

Bitcoin has intrinsic value and it's market cap is only $12 bill

Tulips, have no intrinsic value.

The Bitcoin network eliminates banking fees, and similar to Skype, and has a peer to peer network through internet protocol similar to Email. It is quickly taking out Western Union's market share and will become the most efficient method of transferring funds over the internet.

Therefore Biticoin, backed by 9 petaflops of processing power within it's network, has intrinsic value. Bitcions are merely a unit of account.

1000's of companies are adding the ability to accept Bitcion as payment through processors such as Bitpay.com, they take no market risk to bitcion's price, and can exchange their bitcion directly into US dollars if they choose to. They also eliminate processing fee's and charge backs that credit cards plague them with.

Sit on the sidelines in your ignorance. I was able to do all my Xmas shopping with Bitcion. Were you able to do that with your gold and silver? Probably not, I would venture to guess that you are working for, and spending FRN's. The biggest ponzi scheme of all time.

The Red Coats are coming!

" intrinsic value" ?

There maybe only so many bitcoins out there but there are other crypto-currencies out the that people can obtain at a lot lower price and use, if they so choose.

There maybe a few more places right now, that people can spend bitcoins at, because they had a head start, but I have no reason to believe that will be that way forever.

There might be 1000 different crypto-currencies out there next year that you can do the same thing with, if not more, than you can do with a bitcoin.

Everything you are saying is hype.

and a new Ponzi scheme ALWAYS needs unique hype or nobody will buy it.

Bitcoin qualifies.

There is saying, that if it's

There is saying, that if it's too good to be true, it probably is. Your rant sounds just like people during the housing bubble, that they were getting a great deal in getting a house with no down payment, and bad credit score, if a bank could give them a loan to buy it, which the banks were greedy enough to do. Even Austrian economists are saying Bitcoin is a bubble from excessive liquidity. You are going to get slaughtered if you stay in this market. Get out now or be sorry later. Gold and Silver (commodities in general) are real assets. Bitcoin is an imaginative currency based on FAITH like what the U.S. Dollar is!

another person who does not know what "intrinsic" means

by your logic, you could also say the tulip is backed by sun's 10^33 Joules of energy through the chlorophyll in the leaves through a process called photo-synthesis.