Here’s an irony for you: my twitter feed is full of bitcoin enthusiasts telling me about all the stock/tech/bond/property bubbles that are fizzing about in the world. But there is complete silence on the Bitcoin Bubble front.
Tracking the Bitcoin Bubble
At the time of writing this, Bitcoin has had an excellent 12 hours:
The average price of a bitcoin (BTC) in US dollars has leapt from about $2,025 to just under $2,170. That’s a 7% return in 12 hours.
If you were to extrapolate this into an annual return: the last 12 hours were the equivalent of an 0.84 septillion percent return. For the record, a ‘septillion’ involves 24 zeros at the end of it. Also for the record – I really don’t like doing that sort of math, because there are all kinds of problematic assumptions. Although it does show that there is something extraordinary going on.
Bitcoin has also had an excellent 12 months:
The price has gone from about $443 to today’s $2,170. Which is a return of 487%. In a year.
Bitcoin has also had an excellent time of it since inception:
Which started off at about $0.06.
So that’s a 3,616,667% return over time.
These are dystopian numbers – even if they are ‘real’.
So is Bitcoin in a bubble?
I’ve been asked this question at least three times since last Monday. One of my responses was in an email, so I’m going to re-write a portion of it here:
Whatever ever else you might say, I think it’s very clear that there is a (very) strong demand out there for a currency alternative that *feels* like money but is outside the control of the *system*.
The problem for me: that demand feels more like desire. That is: this doesn’t feel particularly ‘economical’ – it seems more like religious fervor. And movements that are shrouded in conspiracy theory and mass dislike of the status quo are powerful forces.
So do I think that bitcoin is a bubble? Absolutely. It has all the hallmarks.
But do I think it will pop any time soon? Here, I’m not so sure. Mass movements filled with zealous fanatics seen to have their own kind of momentum.
And who know where that momentum may take us.
Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.
Mark May 23, 2017 at 18:04
un related but would you say that the cape town property market has all the hallmarks of a property bubble?Reply
Jayson May 29, 2017 at 07:37
It’s a good question (mainly because you know I have a natural skepticism for property investment!). To be honest, my sense is that there isn’t really a bubble. The troubles is that the demand for Cape Town property tends to tap into a different class of property buyer. In most cities, the home-owning is driven by the people that live there. But in some cities, like London, New York and (perhaps) Cape Town, you get the global elite (and the South African elite) competing for beautiful homes on the Atlantic Sea Board. And that tends to distort things. The high prices in the Seaboard forces the upper middle class of Cape Town into other areas, which drives up those prices – and so the thing ripples outward. The market might have some fragilities (like what happens if there’s a sudden change in taste?) – but that’s not really a bubble problem. Bubbles require lots of short term buyers to stampede around. And that doesn’t sound like Cape Town property buyers. But perhaps that’s just me?Reply