When I joined Steemit, in October last year, Bitcoin was playing around $1000 and there were people eager to sell at that price, considering that plateau as an all time high, a level that won't be matched soon. 6 months later, buying Bitcoin at $1000 could have yielded more than %50 profit. Amazing, right?
And I'm not even talking about Ethereum, which, at that time, was trading at around $10, and now it's over $180. I'll leave you do the math here, because I'm getting dizzy.
So the big question now is: "are we really in a crypto bubble?". As someone who witnessed - from a player position - a big bubble 20 years ago (the dot com implosion) I learned the only thing that you can learn about a potential bubble: you really never know.
Yes, there are signs, but you can never be sure.
And even if we are in a bubble, there will always be winners. Amazon is one of the survivors of the dot com bubble, for instance, and it was obviously toughen up by that process.
So, here are 3 reasons why I think we are in a crypto bubble and 3 reasons why I believe we're not. Make your own picks:
3 Reasons We're In A Crypto Bubble
1. Price Going Up Too Fast
The speed at which Bitcoin is eating up the pockets of investors is impressive, but also a bit alarming. If the trend continues, then the bottom of the pockets should be reached soon. Although there is a lot of room to grow, the speed at which this growth is happening may create some havoc along the way.
2. Technology Lags Behind The Price
Let's be honest, there are many better alternatives to Bitcoin, if we're to talk only about the speed and cost. When a transaction can last up to a few days and its price can go up to a few dozens dollars, then you think you'd be better off with Western Union. So, the surge of the price is not matched by the technology. From that point of view, Bitcoin is certainly hyped.
3. Limited Real Life Consumption of the Coins
When we look at the places where you could actually spend these coins, we don't find a lot of them. Yes, you can buy with Bitcoin on Amazon and even PiHut, but that's equally true for gift cards. And I don't see the price of gift cards rising explosively. There are also a few use cases (like Venezuela, and Japan, see below) where Bitcoin can solve real life problems, but these are relatively isolated.
3 Reasons We're Not In A Crypto Bubble
1. Bitcoin Dominance Is Under 50%
The digital coins market is not dominated by Bitcoin like it used to, 6 months ago. At that time, Bitcoin had more than 80%. Now it's under 50%. That means a very interesting thing: the investment are diversified. People are buying into much more than Bitcoin. And the fact that Bitcoin is occupying less and less space of this market, can also mean that a potential downfall will have a smaller impact.
2. The Bitcoin / Ethereum Alts Gateway Effect
If we're looking at one of the most important reason for Ethereum's growth, it has to be the ICO's. In other words, if you want to invest in other projects on the Ethereum blockchain, you have to buy Ethereum and that was probably a very important driver for the price rise. So, people are genuinely interested in altcoins, for various reasons (like distributed storage with Storj, or blogging with Steem) and the price is justified because there's real demand.
3. Japan Accepts (and tries to regulate) Bitcoin
In Japan, Bitcoin is actually a currency. And Japan is a very, very important economy of this world. If real economy processes are starting to consume Bitcoin just like they consume fiat currencies, then that's also a natural reason for the price to go up. There are also regulatory processes in the making (or so I heard) but that couldn't hurt much, as long as the core nature of the coin remains distributed and censorship resistant.
So we may or we may not be in a crypto bubble. Both options are valid.
And that's the beauty of life.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses