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Addressing the Cryptocurrency Bubble

Cryptocurrency Bubble

The Cryptocurrency Bubble

Whenever you mention Bitcoin or any Cryptocurrency, people seem to start screaming “Bubble!” “Bubble!’. But are we in a bubble? It’s very hard to say. Bitcoin is extremely speculative and with one piece of good or bad news, we can see the price shoot up or drop ten percent. Then what are we able to say? We have been seeing an unprecedented rise in the price of Cryptocurrencies and they have a ton of hype surrounding them. That seems like bubble-like behavior… right? It may not be so simple. We are in an entirely new market with deflationary currencies that are like nothing we’ve ever seen. There is much more to this alleged Cryptocurrency Bubble.

Jamie Dimon recently harshly spoke out against Bitcoin. Dimon compared Bitcoin to the 1600’s Tulip Mania. If you aren’t familiar with this, it was one of the largest bubbles of all time. The demand for tulips shot up rapidly, along with the price. Many invested in tulip bulbs thinking they were a great investment for the future, just for it to come crashing down a few years later. Many of the early investors made a fortune if they sold early, but a ton of people lost everything they had.

Cryptocurrency bubble

So are Bitcoin and other Cryptocurrencies like the tulips? Are we in a big Bitcoin and Cryptocurrency bubble? There are a few problems with this comparison. First, I’m going to address the Bitcoin bubble theory. If we take a look at the tulip mania, one of the issues is that these tulip bulbs were useless. Not only were they useless, but you can create more and more tulip bulbs. Bitcoin is deflationary. Not only are you not able to create more Bitcoins, but with time the amount of Bitcoins that exist will decrease due to inactive wallets, incorrect transactions, etc. Bitcoin is also used to purchase many goods online (legal and illegal). There are also countless brick and mortar establishments that accept Bitcoin. If you take this into account, you would see that Bitcoin abolutely has real value. But is Bitcoin overvalued? It’s hard to say. Bitcoin is extremely speculative and the price fluctuates radically. Bitcoin is also deflationary, unlike traditional currencies which are inflationary. We can’t apply traditional reasoning to Bitcoin due to this.

Time to address the Cryptocurrency bubble. If we take a look at Cryptocurrencies in general, there could potentially be an infinite amount of them. This entire market is much a much different case than Bitcoin. There are plenty of Cryptocurrencies that are pretty much useless but have a market cap in the millions. Just take a look at Dogecoin. There is no specific purpose behind this coin than for collecting. There are many others just like this. The Cryptocurrency bubble theory could definitely be reality.

So how do you make a good investment in the Cryptocurrency space? Don’t buy coins that are low quality and useless. Invest in coins with a great team and high quality technology. One thing that’s unique about Cryptocurrencies is that unlike traditional fiat, they can evolve. The team behind Bitcoin or Ethereum can continuously add new features to the currencies that make them quicker, more efficient, have improved features, etc. You need to find which high quality Cryptocurrencies you would like to invest in and hold them for the future. If you choose the right one’s, you could be very well off in a few short years. This new space is full of opportunity and you just have to seize it.

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