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.