Is Bitcoin a bubble?
In other words, is the spectacular rise in the value of Bitcoin based in reality, or is it unlikely to last?
Ingram answered the question by comparing the current popularity of investments in Bitcoin to the Tulip Bubble, the Ostrich Feather Bubble and the South Sea Bubble.
The tulip bubble began in 1633.
At one point tulips increased in value by 20 times in a month!
At the peak of the market you could trade a single tulip for an entire estate!
Every bubble eventually bursts – the tulip bubble popped in 1637 when prices dropped and panic selling began.
It wasn’t long before tulip bulbs were trading for about the same price as a single onion.
Ostrich Feather Bubble
Feathers boomed between 1890 and 1914.
At their peak you could get more money for a kilogram of feathers than a kilogram of gold!
South Sea Bubble
Even Isaac Newton was a victim of a bubble, namely the South Sea Bubble.
The South Sea Bubble was one of the first famous financial bubbles of modern times.
It took place between 1711 and 1720.
Newton bought shares in the South Sea Company - the hottest stock in England.
He sold and made 100% profit.
But he got greedy and reinvested at a price close to the peak.
He held on when the bubble started bursting, only selling once the price completely collapsed to far below what he paid.
This is, according to legend, the event that prompted him to exclaim, “I can calculate the movement of stars, but not the madness of men!”
Stocks in the South Sea Company were traded for 1000 British pounds at their peak (unadjusted for inflation).
By 1720 they were worth nothing.
Is Bitcoin a bubble?
How do you know if Bitcoin is overvalued?
Unlike shares; the digital currency makes no profits.
It’s also not backed by a central bank or government, so you can’t view it as a currency or compare it to other currencies.
Bitcoin is up by about 200% so far in 2017.
For more detail (and an answer to the question); listen to the interview in the audio below.
Enter your email address in the form below to receive a newsletter containing the most-read articles of the week from Bruce Whitfield’s The Money Show every Friday morning in your inbox.
Recommendedby NEWSROOM AI
Not convinced? The Money Show's Bruce Whitfield asks Personal Financial Advisor Warren Ingram for tips to budget well.
Bruce Whitfield asks Financial Advisor Warren Ingram for advice on retirement investing in a post-Zuma South Africa.
The Money Show’s Bruce Whitfield interviews Warren Ingram, Personal Financial Advisor and Executive Director at Galileo Capital.
The Money Show Bruce Whitfield interviews famed tech commentator Simon Dingle.
On April 2 a Bitcoin was worth $1079. By May 2 it was worth $1428.
Financial institutions, adapt or die! Rand Merchant Investments’ Dominique Collett discusses 2017's major "fintech" developments.
Consumer journalist Wendy Knowler explains how a new court ruling will impact consumers applying for credit in South Africa.
The Western Cape Premier is in the spotlight again due to posting an 'insensitive' tweet about Life Esidimeni tragedy.
Activist and musician Jennifer Ferguson, says she has not ruled out the route of a civil court regarding her rape claim.
Advocate Dali Mpofu receives praises after he represented Kagiso Rabada in his appeal against the ICC's decision to suspend him.
Immigration lawyer Gary Eisenberg explains the new rules for South Africans applying for a Schengen visa
Elon Musk, as you’d expect, hails from an exceptional family. Bruce Whitfield interviews his Capetonian father.