Ask HN: Is BitCoin phenomenon really a bubble? | Hacker News Reader

Ask HN: Is BitCoin phenomenon really a bubble?

10 pointsbhnmmhmd18 comments

For a year now, me and my friends have been witnessing the insane increase in BTC price from around 800$ in December 2016 to over $18K in December 2017.

We've been telling each other that it's just a huge bubble that's not gonna last for long. Is this right? I know, no one can really predict financial markets, but I'd like to know what the Swarm Intelligence on HN thinks like.

Also, what about other cryptocurrencies? I hear LiteCoin, Ethereum, BitCoin Cash, etc. are also available. Do they suffer a bubble too?

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I like Paul Graham's description of a bubble: something that people buy just to resell at a higher price. When too many people do this, without understanding how it works, it forms a fragile bubble.

If people have some fundamental understanding of something, they won't panic when they see a price sharply dropping.

The phenomenon with bitcoin is that people are buying and selling purely on hearsay and candles. They don't predict a target price. They don't even understand what they're investing in.

There is panic whenever it drops 30%. Why panic when something goes up 70% and drops 30%? The hodlers say it's a good time to buy, but again, I don't see how a 40% increase in a month makes it a good price.

With so many investments based purely on emotion and little rationality, I would call it a bubble.

Definitely a bubble.

Blockchain (aka programmable trust) is for sure a huge deal.

Think about the dot-com bubble. Nobody knows who is Amazon.com and who is Pets.com yet.

If you want to understand more the original whitepaper is suprisingly approachable, and a really good place to start: https://bitcoin.org/bitcoin.pdf

By (at least) one definition, the price action alone qualifies Bitcoin as a bubble:

https://www.marketwatch.com/story/the-chance-of-a-bitcoin-cr...

To that I would add a question: what's the fundamental value of Bitcoin? If you can't come up with a sensible way to calculate that, you have a price unmoored from fundamentals, which is characteristic of bubbles.

Could it be that BitCoins are limited (I think they can total 21 million BTC) and their applications are growing, so a shortage of supply and increase in demand causes high prices on BitCoin?

The other thing to take into account is that apparently only a few people own a vast majority of bitcoins and these people are not eager to sell. They are basically doing what's called cornering the market.

The price rise is mostly due to scarcity in sellers rather than craze in demand.

The market stability depends on these big owners. And they're not very likely to panic-sell. If one of them wants to get out, they will probably sell slowly over many months.

One sign of a bubble: people who have no idea what it is are trying to get in.

Public companies are adding "crypto", "blockchain" to their company names are seeing their stock price boom. That's how you know its a bubble.

I think Blockchain in general is not a bubble, as described in Gartner 2017 Hype Cycle. But BTC - one specific application of Blockchain - seems to be a bubble.

We have seen this time and time again, the majority will be back to zero, just like during the dot com bubble... everybody and his uncle was a day trader :-)

BitCoin and other altcoins are not "financial markets".

We're dealing with a "bubble" and there's no playbook, so you can put money in and pray to the Gods of Bubbles, get out any time you want, there's no rhyme or reason, hopefully with a net gain.

I think there are a few valid "coins" aka technologies coming out of this space, but of the 1500 crypto currencies out there maybe somewhere in the range of 50 are actually going to amount to anything long term.

You probably want to re-check your price.

https://www.google.com/search?q=1%20BTC%20to%20USD

I know about today's price, but these price falls have been observant in BTC price for over a decade now.

While I agree that today's volatility is nothing new to Bitcoin, I doubt that you have observed price falls for over a decade, given that Bitcoin was introduced on 3rd Jan, 2009.

https://en.wikipedia.org/wiki/Bitcoin

Bitcoin seems to have experienced an exponential growth in price ever since 2009.

What I'm really confused about with Bitcoin is this 21M coin cap built into it.

I know it's there to keep the Bitcoin money supply finite. Emulating the properties that make gold such an attractive commodity to back a currency with.

But every coin is infinitely divisible, so doesn't that defeat the purpose of the 21M cap?

When every coin is infinitely divisible, isn't Bitcoin's money supply is effectively infinite?

Why does the 21M Bitcoins cap matter if every coin is infinitely divisible?

At first, I thought this 21M cap causes exponential increase in BTC price, until I saw your comment about BTC being infinitely divisible. A bit search on the internet though proves this hypothesis wrong:

https://bitcoin.stackexchange.com/a/19670

Turns out, BTC is only divisible down to 8 decimal places.

Thanks for pointing that out, but on that same thread the next answer says:

> If there is a need for them, additional decimal places can be added with concensus of the network. This is why some refer to "infinite" divisibility, because we can select the level that we need as time goes on.

Because this 8 decimal place limit can be extended later, my hypothesis that Bitcoin's money supply is effectively infinite cannot be rejected.

I think Bitcoin is a bubble in the same way that gold is a bubble.

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