Bitcoin about to burst

Is Bitcoin’s Bubble About To Burst?

Fasten your seat belt because this week there will be something interesting, including the OPEC meeting and US and Eurozone inflation data.

Meanwhile, all the majors are keeping their ranges. The only exception is Bitcoin , which has climbed to the new record highs. The currency skyrocketed to $9500 on the news that one of South Korea’s largest commercial banks Shinhan (NYSE: SHG ) is testing a virtual Bitcoin vault that is expected to be offered to clients in mid 2018.

Since the beginning of this year, the cryptocurrency has added more than 900%. Of course compared to Etherium’s +5000% is just nothing, but anyways. On Monday morning, Bitcoin peeped above the $9500 mark. We can see all the signs of a market bubble.

Of course, it may take a while for this bubble to burst. It may take a while before the market starts panicking and breaks into a run. What we see now is a growing popularity of the digital money, let’s say ‘crypto boom.’ So it will likely continue scrambling to the upside. The test of $10,000 is not ruled out and we may see it this week.

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Last November, we highlighted a cup and handle bullish pattern on Bitcoin that served as a base for a big rally. All together, Bitcoin rallied from roughly $4,000 last March to.

This article was written exclusively for Investing.com The parabolic period ends — Bitcoin halves, Ethereum does slightly better on the downside Bitcoin is the leader — Ethereum is.

Karura’s crowd loan of $100 million puts the project in a good position for Kusama’s upcoming parachain auction. Key Takeaways Karura Network has raised 200,000 KSM tokens worth.

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Is Bitcoin A Bubble: The Great Bitcoin Bubble Burst

Is Bitcoin a bubble that’s about to burst? Follow this tutorial to find out when will the Bitcoin bubble burst & is Bitcoin a bubble by any means.

Last Updated: January 05, 2021

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Ever since the early days of Bitcoin, skeptics have always asked — is Bitcoin a bubble? Is it just another inflated and overhyped trend? The concept of the “Bitcoin bubble” has intrigued people for many years — there have been a lot of calls and claims that the “Bitcoin bubble burst” happened on different occasions throughout time — but the cryptocurrency is still alive and well.

In this tutorial, we shall try to uncover the mysteries of the Bitcoin bubble — what it is, why people are talking about it, how it’s characterized and so on. We’ll talk about the “for and against” arguments that are most often brought up when talking about this “bubble”.

After that, we’ll try to answer the ever-longing question — is Bitcoin a bubble? And if it is… When will the Bitcoin bubble burst?

Table of Contents

What Does Bubble Mean?

So we have the question — is Bitcoin a bubble? But what does the expression “Bitcoin bubble” actually mean?

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In financial terms, a “bubble” is a state where an asset stays stale for the longest time, then explodes and its price skyrockets through the roof. The “burst” that was referenced happens when this asset’s price drops down as quickly as it rose up.

The fall has to be very specific, however — and by specific I mean permanent. If the asset (in this case, Bitcoin) manages to rise again, then that wasn’t a “bubble burst”.

How do you tell if it’s a burst or a false alarm while the drop is happening, though? Well, that’s the tricky part — you can’t tell all that easily.

If you’re a Bitcoin expert that has been following the coin ever since its inception, you might be able to tell a thing or two about its future. However, when it comes to cryptocurrencies, they have one very important trait — they are absolutely unpredictable and extremely volatile.

You might have followed Bitcoin day-by-day from the minute that it was released and still be completely out of line with your predictions. There are so many unpredictable things that can happen to sway the coin’s price that it becomes almost impossible to keep up.

Now I’ll show you why people believe that the Bitcoin bubble has burst.

The Bitcoin Bubble

People tend to define financial bubbles in many different ways. For simplicity’s sake, I’ll split it into three major parts.

• At the very beginning, the price of an asset is very low and not noteworthy. It fluctuates a bit but is at a constant low most of the time. This is where people don’t give the asset much attention, it still hasn’t participated in any notable situations or events to get noticed.
• At a certain point, the asset starts gaining traction and rising in price. The thing that differentiates this growth from any other normal asset growths is intensity — the price rises with increasing intensity and speed. This happens because while people see that the asset is promising, they also want to invest in it and make a quick profit. The more people start joining in the bandwagon, the faster the price inflates — just like a bubble.
• The third and final stage is the breakdown — just as the price rose without any apparent reason, so does it fall. This is where people start panic-selling all of their assets, fearing that the price will crash even more and they’ll lose money. This becomes a never-ending cycle until the price of the asset does completely crash — or, in other words, the bubble bursts.

Now, with the above-given knowledge in mind, take a look at the graph below:

Does this remind you of something?

This is the Bitcoin price chart, from the moment of its inception up until the present day.

As you can tell, this chart has most of the features of a bubble — a slow and stale beginning, a sudden peak and then an equally sudden drop. But the last part is a bit different — the price didn’t drop to zero. Furthermore — it seems to have stabilized.

This is often one of the main visual arguments that Bitcoin supporters use when trying to disprove the claim that Bitcoin is a bubble. When such a financial bubble bursts, the price hits dead zero fast, and there’s usually no chance for recovery. When it comes to Bitcoin, however, we can see that that’s not the case.

So is Bitcoin a bubble? Let’s analyze some of the more common “for and against” arguments to get a bigger picture.

People who answer the question “is Bitcoin a bubble?” with a positive answer have a few big arguments to back up this claim.

First of all, they say that Bitcoin simply isn’t tangible — it’s a decentralized currency, which means that no one government would back it up. Fiat currencies have a certain amount of stability because they have huge banks and governments that support them. Additionally, they’re sanctioned and even incentivized — you can pay your taxes with fiat currencies and use them for other official matters. When it comes to Bitcoin (and most of the other cryptocurrencies), however, this is not the case. Different governments tend to sanction Bitcoin in very different ways simply because it doesn’t have a concrete owner — no one person or organization controls the cryptocurrency in question.

Another big argument is that Bitcoin was simply overhyped and inflated far beyond measure. It was the first phenomenon of its kind — there were a lot fewer people that bought it to use it when compared with the number of people who wanted to simply flip it — buy it low and sell it high.

Since the crypto-coin didn’t have a strong enough backing of supporters that cared for its well-being, the price kept on being inflated by those who were simply looking for ways to make a quick profit.

Because of Bitcoin’s volatility, governments around the world have decided to sanction and tax it’s usage, with some going as far as actually banning the cryptocurrency. This was one of the main factors that led to Bitcoin’s huge crash in price.

Probably one of the strongest arguments that claim Bitcoin to be a bubble is that it’s simply too clunky and, well… old.

Now, cryptocurrencies like Litecoin, IOTA and Ethereum have managed to surpass Bitcoin in almost every aspect possible. Litecoin is four times faster than Bitcoin, IOTA is technically superior and Ethereum is an actual network that is used to build and create other cryptocurrencies. Every day, we see new and heavily improved cryptos enter the market — Bitcoin was the original one, and the staple for cryptocurrencies in the mainstream, but how long can this reputation last until people start realizing the coin’s drawbacks?

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How Bitcoin’s vast energy use could burst its bubble

By Justin Rowlatt
Chief environment correspondent

We’ve all heard the stories of Bitcoin millionaires.

Elon Musk is the latest.

His electric car company Tesla made a paper profit of more than $900m (ВЈ646m) after buying $1.5bn (ВЈ1bn) -worth of the cryptocurrency in early February.

Its high profile support helped pushed the price of a single Bitcoin to more than $58,000.

But it isn’t just the digital asset’s price that has hit an all-time high. So has its energy footprint.

And that’s caused blowback for Mr Musk, as the scale of the currency’s environmental impact becomes clearer.

It also helped prompt a series of high profile critics to slate the digital currency this week, including US Treasury Secretary Janet Yellen.

President Biden’s top economic adviser described Bitcoin as «an extremely inefficient way to conduct transactions,» saying «the amount of energy consumed in processing those transactions is staggering».

It’s unclear exactly how much energy Bitcoin uses. Cryptocurrencies are — by design — hard to track. But the consensus is that Bitcoin mining is a very energy-intensive business.

The University of Cambridge Centre for Alternative Finance (CCAF) studies the burgeoning business of cryptocurrencies.

It calculates that Bitcoin’s total energy consumption is somewhere between 40 and 445 annualised terawatt hours (TWh), with a central estimate of about 130 terawatt hours.

The UK’s electricity consumption is a little over 300 TWh a year, while Argentina uses around the same amount of power as the CCAF’s best guess for Bitcoin.

And the electricity the Bitcoin miners use overwhelmingly comes from polluting sources.

The CCAF team surveys the people who manage the Bitcoin network around the world on their energy use and found that about two-thirds of it is from fossil fuels.

Huge computing power — and therefore energy use — is built into the way the blockchain technology that underpins the cryptocurrency has been designed.

It relies on a vast decentralised network of computers.

These are the so-called Bitcoin «miners» who enable new Bitcoins to be created, but also independently verify and record every transaction made in the currency.

In fact, the Bitcoins are the reward miners get for maintaining this record accurately.

It works like a lottery that runs every 10 minutes, explains Gina Pieters, an economics professor at the University of Chicago and a research fellow with the CCAF team.

Data processing centres around the world race to compile and submit this record of transactions in a way that is acceptable to the system.

They also have to guess a random number.

The first to submit the record and the correct number wins the prize — this becomes the next block in the blockchain.

At the moment, they are rewarded with six-and-a-quarter Bitcoins, valued at about $50,000 each.

As soon as one lottery is over, a new number is generated, and the whole process starts again.

The higher the price, says Prof Pieters, the more miners want to get into the game.

«They want to get that revenue,» she tells me, «and that’s what’s going to encourage them to introduce more and more powerful machines in order to guess this random number, and therefore you will see an increase in energy consumption,» she says.

And there is another factor that drives Bitcoin’s increasing energy consumption.

The software ensures it always takes 10 minutes for the puzzle to be solved, so if the number of miners is increasing, the puzzle gets harder and the more computing power needs to be thrown at it.

Bitcoin is therefore actually designed to encourage increased computing effort.

The idea is that the more computers that compete to maintain the blockchain, the safer it becomes, because anyone who might want to try and undermine the currency must control and operate at least as much computing power as the rest of the miners put together.

What this means is that, as Bitcoin gets more valuable, the computing effort expended on creating and maintaining it — and therefore the energy consumed — inevitably increases.

We can track how much effort miners are making to create the currency.

They are currently reckoned to be making 160 quintillion calculations every second — that’s 160,000,000,000,000,000,000, in case you were wondering.

And this vast computational effort is the cryptocurrency’s Achilles heel, says Alex de Vries, the founder of the Digiconomist website and an expert on Bitcoin.

All the millions of trillions of calculations it takes to keep the system running aren’t really doing any useful work.

«They’re computations that serve no other purpose,» says de Vries, «they’re just immediately discarded again. Right now we’re using a whole lot of energy to produce those calculations, but also the majority of that is sourced from fossil energy.»

The vast effort it requires also makes Bitcoin inherently difficult to scale, he argues.

«If Bitcoin were to be adopted as a global reserve currency,» he speculates, «the Bitcoin price will probably be in the millions, and those miners will have more money than the entire [US] Federal budget to spend on electricity.»

«We’d have to double our global energy production,» he says with a laugh. «For Bitcoin.»

He says it also limits the number of transactions the system can process to about five per second.

This doesn’t make for a useful currency, he argues.

And that view is echoed by many eminent figures in finance and economics.

The two essential features of a successful currency are that it is an effective form of exchange and a stable store of value, says Ken Rogoff, a professor of economics at Harvard University in Cambridge, Massachusetts, and a former chief economist at the International Monetary Fund (IMF).

He says Bitcoin is neither.

«The fact is, it’s not really used much in the legal economy now. Yes, one rich person sells it to another, but that’s not a final use. And without that it really doesn’t have a long-term future.»

What he is saying is that Bitcoin exists almost exclusively as a vehicle for speculation.

So, I want to know: is the bubble about to burst?

«That’s my guess,» says Prof Rogoff and pauses.

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