Bitcoin may (or may not) be a bubble. Check this out before taking the plunge
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.
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This article first appeared on 702 : Bitcoin may (or may not) be a bubble. Check this out before taking the plunge
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