Bitcoin Bubble Warning: Is It About to Burst?

Posted by Allison on 17 December 2017, 04:53

On New Year’s Eve last year, a single Bitcoin was worth $959.20. At the time of writing, as we fast approach the end of this year, the price stands at $17,822. That is a huge increase, and even as I sit here and write this, the price is still mostly on the up.

But how long can this last? Are we to believe some of the headlines warning of a Bitcoin bubble that is about to burst? Or are there yet more heights to be reached?

The biggest question of all is this – how can we tell where this currency could go? Yes, it could burst tomorrow (or even as I write this) and we could end up seeing a value closer to last year’s closing rate. Experts have already confirmed the Bitcoin bubble is the biggest of its kind, beating even the Tulip Mania Bubble of the 1600s. But a bubble refers to the time prior to it bursting, which means these same experts are predicting a huge fall yet to come. 

But is it fair to compare Bitcoin to other more traditional investments? It is, after all, a virtual currency. You can never hold a Bitcoin in your hand. You’ll never see one, other than as a number on a screen. The bubble can only be confirmed to have existed once it bursts, and at present, that has yet to occur. Few could ever have imagined seeing a price of $17,822 for a Bitcoin at the start of this year, and yet that is exactly where we are now. Actually, it has just dropped to $16,317, before heading north to $17,777 again.

This is not a currency to invest in if you feel nervous about rises and falls in the value of something. And in truth, no one knows exactly what will happen next. The virtual nature of the currency – and the limit to the number of Bitcoins that can be mined – means few, if any of us, can be certain of what the future holds for it. No one can truly place a value on it because it is still in its infancy, essentially. The elements usually in place to help us determine whether a bubble exists or not are not relevant here. So, could we still be looking at a cryptocurrency in its infancy? Will we look back a year from now and wish we too had bought a Bitcoin or two if we could afford it? Will we see yet higher prices, perhaps reaching beyond twice the value the currency is at now?

Who can tell? And that is the speculative nature of investing in a virtual currency. You never know what might happen just seconds after you buy into it, let alone months or years later.

 

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