Anything that is hard to determine its intrinsic value and went up 10000x in price over from its listing in just 6 years can be considered a bubble.
But bubble can go on for a long time, some lasting for 8~9 years. Personally I think crypto currency is revolutionizing the way money is being considered and traded, and can be considered the way nuclear power is revolutionizing the way energy was generated in 2005.
Back then price of uranium went from $5 per lb to close to $140 per lb, going up 28x before the bubble burst and went back to $20 lb. If using the same level of interest and use bitcoin price of $1000 as base, then it can go as high as $28000 before going down to $4000 if people consider crypto to be as important as energy to human being.
Not saying bitcoin is definitely going to another high, but at current price new investors are taking a big risk even if bitcoin is going to be as important as nuclear power.
e.g.
Person A - 1 bitcoin = $1,
some stranger B invest $1,
now 1 bitcoin = $2
some stranger C invest $2 again,
now 1 bitcoin = $4
Person A use 0.5 bitcoin to buy $2 pizza (Used in realworld) <--- bubble
now 1 bitcoin = $2
Person A cash out remaining 0.5 bitcoin ($1) <--- bubble
CONCLUSION:
Person A earned $2 by investing $1 = Total is $3
Person B (1 share) & Person C (2 Share) have $1
Person B cannot wait and scared, sold off his bitcoin to let say person D who buy at $0.33.
Person B gets $0.33 (loss 66%)
1 Bitcoin = $0.66
Person C currently loss more than 50% have $0.66 value of bitcoin, and Person D brought one bitcoin at $0.33 and waited patiently for Investor E, F to donate to the market.
While Person C suffer a loss, Person D is waiting to gain (no loss incurred yet), unless person C sold his share to other person who willing to buy.
If you don't cash out to use in the realworld, the money is never yours. Not forgetting the transaction fee incurred by bitcoin founder, the amount actually lesser.
When bitcoin bubble burst, one the of the few rich (who has a higher share [CEO, drug dealer]) will take away money from those millions noobs.
When bitcoins raise from $1 to $2 = 100% earning
When bitcoins raise from $2 to $3 = 50% earning.
When bitcoins raise from $3 to $4 = 25% earning.
If Person X want to earn more, start invests at very early stage. Now at $16000, to earn at 100%, you need the price to be at $32000.
Compared to those Person Y who invested at $8000, they will be earning 400% when price reaches $32000.
So who is most likely to cash out, Person X or Y?
Supply and Demand - limited bitcoins, the whole world wants, but most of them do not know why they want it, just put in the money and hope to earn. Money is used for transaction in real world, to exchange products. The purpose of bitcoins is used to pass a sum of money to another person ANONYMOUSLY using a technology (blockchain) that is recordable but untraceable [illegal activities], seldom it is used for transaction of products due to its volatility. Now some shops also joined in the fun, If countries starts to ban / control / regulate bitcoins, or shops lost confident of bitcoins, that's it. Pop, pop, pop.
when someone wants to "cash out", it means he is trying to sell it off, and someone else have to buy it. so the logic of where they find the cash to pay the seller is from the buyer.
when someone wants to "cash out", it means he is trying to sell it off, and someone else have to buy it. so the logic of where they find the cash to pay the seller is from the buyer.
I have an undergrad in business and a masters in finance and accounting. I work in the financial industry. I hold some bitcoin, not sure I would call myself a "bitcoin investor" - I did not acquire them as an investment, I was just interested in the technology. Why do you ask?
I predict that bit coin will one day be like the monkey story below.
Want to know about
*BITCOIN*
A lot of monkeys lived near a village.
One day a merchant came to the village to buy these monkeys!
He announced that he will buy the monkeys @ $100 each.
The villagers thought that this man is mad.
They thought how can somebody buy stray monkeys at $100 each?
Still, some people caught some monkeys and gave it to this merchant and he gave $100 for each monkey.
This news spread like wildfire and people caught monkeys and sold it to the merchant.
After a few days, the merchant announced that he will buy monkeys @ 200 each.
The lazy villagers also ran around to catch the remaining monkeys!
They sold the remaining monkeys @ 200 each.
Then the merchant announced that he will buy monkeys @ 500 each!
The villagers start to lose sleep! ... They caught six or seven monkeys, which was all that was left and got 500 each.
The villagers were waiting anxiously for the next announcement.
Then the merchant announced that he is going home for a week. And when he returns, he will buy monkeys @ 1000 each!
He asked his employee to take care of the monkeys he bought. He was alone taking care of all the monkeys in a cage.
The merchant went home.
The villagers were very sad as there were no more monkeys left for them to sell it at $1000 each.
Then the employee told them that he will sell some monkeys @ 700 each secretly.
This news spread like fire. Since the merchant buys monkey @ 1000 each, there is a 300 profit for each monkey.
The next day, villagers made a queue near the monkey cage.
The employee sold all the monkeys at 700 each. The rich bought monkeys in big lots. The poor borrowed money from money lenders and also bought monkeys!
The villagers took care of their monkeys & waited for the merchant to return.
But nobody came! ... Then they ran to the employee...
But he has already left too !
The villagers then realised that they have bought the useless stray monkeys @ 700 each and unable to sell them!
The Bitcoin will be the next monkey business
It will make a lot of people bankrupt and a few people filthy rich in this monkey business.
I have an undergrad in business and a masters in finance and accounting. I work in the financial industry. I hold some bitcoin, not sure I would call myself a "bitcoin investor" - I did not acquire them as an investment, I was just interested in the technology. Why do you ask?
I first heard about it quite a few years ago, I've read a lot about it and heard probably every opinion out there, it's very hard to summarize it all in a post. For reference, I've heard people call it a bubble at $100, $800, $1000, etc.
My personal belief is that it has failed at its original intent - the title of the satoshi paper is "A Peer-to-Peer Electronic Cash System" and Bitcoin is quite bad at being a cash/payment system right now. Other cryptos are better, and are getting better at a faster rate - the development on the original Bitcoin has slowed down to nearly a halt now. Also, bitcoin was released nearly 9 years ago - in the meantime there are a lot of other electronic payment systems that did not exist back then - so arguably the "need" for a bitcoin is lower than it was 9 years ago.
So right now it's a store of value or tool for speculation - not what it was designed to do, but not much anyone can do to stop it.
All of which bears no relationship to its price - it could well continue to go up. As time has passed, I've grown a little tired of listening to what others think about bitcoin, there are simply very very few original thoughts, or things that have not been already said. But what really turns me off is people making predictions about where the price will go in the future. And that's true for both extremes - both people who say it will crash to zero, and people who say it will go to 100,000+. Nobody knows. But we all know it's risky and volatile.
If you are young and have disposable income, it's not entirely unwise to invest / speculate with a certain percentage of your savings / net worth in crypto. But leverage of any kind (either to buy or to short bitcoin) is insanely risky in my opinion. And should probably be banned, to reduce risk to the average investor (in places like Korea and Japan).
A final thought is that I'm a little surprised how slow regulators have been. I expected more forceful actions, earlier. That being said, at a objective, rational level, crypto / bitcoin doesn't have the scale yet to be a risk to the financial system. But it could do a lot of local damage, at the individual investor level.
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Then they ran to the employee...
