Is Bitcoin in a Dangerous Bubble?
The price of bitcoin has changed dramatically over the past few months. Around September, it virtually exited the bear market it had been in since the previous bubble burst around January 2018 (a technical term for a market dominated by sellers). Since then, the price of Bitcoin has skyrocketed, recording gains that would make most fund managers' careers. Both in the world of traditional banking and the cryptocurrency community, this kind of growth has sparked discussion.
We may be trapped in a hazardous bubble, some people have warned. Are these assertions accurate? Bitcoin's price more than doubled in less than a month after hitting an all-time high of $20,000. In general, assets don't double in value in a month, especially not ones that have previously been around for ten years.
Bank of America's top investment strategist, Michael Hartnett, issued a warning that the entire cryptocurrency industry may be experiencing "the mother of all bubbles." The price of Bitcoin has increased by more than 1000 percent since the year's commencement. Hartnett asserts that this growth is greater and occurring more quickly than well-known bubbles like the dot-com bubble in the late 1990s or the housing bubble before 2008. Although the technological value of this system has been the main driver of Bitcoin's growth, there is no doubt that speculators have entered the game. However, nothing can fully explain that kind of price activity.
Additionally, Fortune cautioned investors that such a rapid price rise was indicative of bubbles and that it frequently fell much faster than it rose. In this scenario, overconfidence in innovations that may still play a significant role in the future but are not worth what people are willing to pay for them at the peak of excitement would be the source of the bubble.