What’s Up With Bitcoin And Other Cryptocurrencies? I Think It’s Called A “Speculative Bubble”

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Do you read the news, or, at minimum, use the Internet?

If you answered “yes” to either of the portions of the above question, it’s almost certain that you’ve seen headlines about Bitcoin, Ethereum, Ripple, Monero, other altcoins – cryptocurrencies other than Bitcoin – or mentions of cryptocurrency, in general.

With Bitcoin rising in price from roughly $970 per bitcoin to just short of $19,000 from January 1st, 2017, to just two weeks short of the year’s end, it doesn’t take much thinking to figure out why cryptocurrencies are so hot right now.

Economic Bubbles Are No Stranger To The World Of Finance

During a few-month-long period in the 1600s, the Dutch tulip craze took place. Commonly referred to as “tulip mania,” the price of tulip bulbs in the Netherlands rose exponentially in just a handful of months. It’s true that some hopeful buyers backed gargantuan loans with their homes as collateral – some families around the planet have done such to invest in Bitcoin, believe it or not.

Surprisingly to many, that bubble burst to many Europeans’ dismay. To provide a sense of relativity, a laborer could expect to earn little more than 350 florins per year’s work; at one point in 1635, 40 sought-after tulip bulbs were sold for a whopping 100,000 florins!

More recently, the “dot-com” bubble burst, withering away to effectively nothing in the first quarter of 2000. All considered, the precedented phenomenon causes a total loss of roughly $5 trillion to the collective base of companies in financial markets.

With Recent Rises, Investing In Cryptocurrency Might Seem Like A No-Brainer

Cryptocurrencies are hallmarked by a handful of characteristics central to their principles of operation:

  • They operate freely of government intervention, fiscal policy, and central banks, placing the power in the collective public’s hands.
  • It’s possible to track all transactions and verify their legitimacy with Bitcoin, including many other cryptocurrencies.
  • They’re entirely digital; with computers being more popular than ever before, it seems logical to believe Bitcoins are next on the list to blow up in popularity.

Even though these characteristics seem to support Bitcoin’s future performance, there’s no way to be sure if Bitcoin’s future prospects. Investors not willing to lose everything they invest in cryptocurrencies should stay away from the crypto market.

History Of Speculative Bubbles Suggest Cryptocurrencies Are Risky

According to seasoned financial advisors and investment professionals with lengthy histories in the field, many consider the Bitcoin/cryptocurrency bubble to be larger than any bubble ever seen in history.

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