Bitcoin seemed unstoppable just before the Christmas of 2017. Its stock market price and value was rising exponentially, and many investors invested into the digital currency in hopes of generating profit from Bitcoin’s newfound popularity and uproar. As the biggest Christmas present of their lives, many investors held the stocks of one of the most successful cryptocurrencies in the world. In 2017, professional investors and amateur traders alike predicted that the stock price of Bitcoin would increase even more.
However, in January of 2018, Bitcoin’s price crashed to less than half of its December value. As a result, many people have speculated if Bitcoin would become a “bubble” and lose all of its value by the end of this year. In March, the price of Bitcoin hovered at approximately $8000. In spite of this dire situation, Bitcoin investors were enthusiastic, hoping that Bitcoin’s price would rise up to $100 000 again by the end of this year.
The cycle of financial bubble stems from three phase, which includes the buying, irrationality, and “saving yourself” periods. In the first period, many investors start to buy a lot of shares in the company. However investors and traders are persuading themselves that increasing prices are due to the fundamentals of the stocks, even if they aren’t. The irrationality period continues the buying period, but this is when investors convince themselves further that they can dodge the crash when it happens. The “save yourself” period happens as investors draw out of their stocks when the stock prices crash or decrease dramatically. Unfortunately, Bitcoin was in phase 2 before Christmas of 2017. Now, it may be in phase 3.
Likewise to Tesla’s stocks, in Bitcoin’s history of market crashes and revivals, optimistic investors insist that Bitcoin may rise again, becoming bigger and better than before. However, a provider of cryptocurrency once said, “Due to the fact that Bitcoin has no intrinsic value, it is extremely vulnerable to investor sentiment.” This idea is evident in the newest plummet of Bitcoin. Last month, the Bitcoin price plummeted to as low as $3600, but rose back up to $4000 in the last week of November. Many contradictory news articles of Bitcoin left its investors confused, but it is unsurprising that the fall of the price has not caused much pessimism among the cryptocommunity.
In the race where many economists view Bitcoin as a “bubble”, many investors choose different avenues to earn their profit. But the real question still stands; is investing in Bitcoin a “safe” option or will its bubble finally burst?