Is Bitcoin the longest lasting true bubble in history? By "true bubble" I mean one based on something that's essentially valueless. Not homes or dotcom companies. Think tulips or meme stocks.
The Bitcoin bubble is now going into its fourth year, outpacing the South Sea bubble, the Mississippi bubble, and the tulip bubble. Its latest rise began a year ago and was supercharged at the beginning of January when the SEC approved the first spot Bitcoin ETF. Since then, Bitcoin ETFs have accumulated more than $50 billion in assets.
The total value of all Bitcoin in circulation is over $1 trillion. That's nothing compared to, say, the Japanese property bubble or the dotcom bubble. But it's still pretty impressive for a commodity that literally has no value except as a collectible.
Circulation, or total mined?
Because you can 'lose' bitcoin and there's no method for them to be rediscovered.
It is supported by criminal organizations that use it for money laundering.
Making life easier for criminals is, and always was, the main point of bitcoin.
Presumably they don't keep their money in bitcoin very long, so don't care too much what the market does as long as it doesn't do it too fast.
But the crooks' high rate of traffic sets a floor that collectors can rely upon.
Yeah, that's the crucial thing. For a currency to retain any value over the long term, it requires *somebody* who will want it even if the rest of the world abandons it.
For normal currencies, that "somebody" is taxpayers in the issuing nation. If you live in the U.S., you need dollars to pay your taxes. Even if you conduct all your other business in euros or renminbi or cryptocurrency, you still have to convert some of it to dollars every April, and that means there is always demand for dollars.
For Bitcoin, the "somebody" is criminals who are locked out of the regular financial system. Any time they want to transfer money electronically, they buy Bitcoin, and thus there is always demand. Not enough to keep the value stable, but enough to ensure that it never falls to zero.
@boronx @yehouda
Exactly. A criminal laundering their money doesn't care if they pay a few percent above market to get the coins or a few percent below on sales. Actually, as long as the "currency" does reasonably well, there'll be enough gamblers mixing their transactions into the market to actually help keep the launderers anonymous.
It's because it doesn't exist so people can imagine it's whatever they think it ought to be, like 'the unborn'.
It's a placebo for hope.
A placenta for hope?
a lot of pseudo-libertarians think it's insurance against the end-times
as if the world will lie in ashes but comcast will be sending out techs to keep their fiber lit
That was like the goldbugs I ran into back in the mid-70s and into the 80s who had gold (supposedly) stored in reputable organizations. What they had in their possession was some pieces of paper - gold certificates.
Which led me to the question - when economic collapse occurs, who is going to deliver the gold to you?
if bitcoin is supposed to replace currency, but it's value is based on dollars, how does that exactly work?
I guess it’s more like a collectible than a currency. I can’t imagine walking into a grocery store and saying “I’ll take everything here including the fixtures, cash registers and safe. Here’s a copy of Batman #1 in payment.” Yet, you could sell your copy of Batman #1 and do just that. I guess Bitcoin is something like that.
Just a guess…my eyes glaze over and my mind boggles thinking about cryptocurrency.
Bitcoins value isn't based on dollars, except inasmuch as they're valued according to the current market price of dollars. It's value isn't based on anything.
Well, not an answer, but more an addendum to the irony you're alluding to: several of the cryptocurrencies with the highest market caps are stablecoins like Tether, whose values are explicitly pegged to the dollar (or other currencies).
To be more precise, those companies have made legally unenforceable promises that any time you want, they'll cash out your stablecoins for USD.
legally unenforceable and factually likely impossible
There are use cases that drive bitcoin. Most of them involve criminal activity, exploiting the "untraceability" of bitcoin transactions.
I'm sure it was seen also as a very good inflation hedge. You know, like gold is.
And they still haven't got the news that inflation is under control and we aren't going to have a recession, either.
Now what's that quote again....something about markets staying irrational longer than you can stay solvent....
It's just a series of classic rises/falls that are simply the greater fool theory in practice. It's a con, that's it.
The old school name for this was "pump and dump". It seems we are back to the pre-SEC days.
It's not pump and dump -- it's money laundering.
in this case i think it's a little from column A and a little from column B
This is, if anything, unfair to tulips and meme stocks. A tulip bulb is useful; it turns into a tulip, and has value for those who like tulips. A meme stock grants you all the normal privileges and perquisites of owning stock in a company.
All bitcoin is is a unit of entry in a ledger somewhere. It can't DO anything except be shuffled around.
"It can't DO anything except be shuffled around."
Au contraire--it can waste a lot of electricity and processor cycles.
As several others have noted, crypto has real utility in money laundering. This sets a price floor.
Of course it has a value. It's useful for money laundering and other criminal schemes and activities. I'm still shocked at it's current value, but I'd guess those criminal uses are why the bubble has persisted so long. They prevent the market from completely collapsing, allowing scammers to somewhat credibly claim any drop is just a temporary glitch due to the idiots who don't HODL.
I’m confident it is only transitory.
Bitcoin has been gaining popularity as a way to pay for online porn. Pornhub, for example, can't accept credit cards, but you can pay in bitcoin.
interesting, but why won't/can't pornhub accept credit cards?
All that power consumption, though.
Forbes in Sept. 2023 wrote about a seeming relaxation of China's ban on crypto by Hong Kong and a Shanghai court, which might explain the rise of Bitcoin after that date. After all, China used to account for 75% of Bitcoin ownership.
Forbes also states that (according to the Chinese) less than 1% of Bitcoin is due to criminal activity. For my part, I think Bitcoin's success is driven by some Asian countries' craziness when it comes to investments. Maybe a lot of people in China hopped from the real estate bubble to the crypto one. Great place to sell tulips, I'd say.
"One of the most famous anecdotes in finance is of a promoter in the 1720 South Sea Bubble who lured investors into putting money into “an undertaking of great advantage, but nobody to know what it is.”
A lot changes . . .
Before the US stock market crash that lead to the Great Depression, one of the scams going around was claiming to have warehouses and barns packed with valuable goods that people could invest in for guaranteed profits. The way the profits could actually be taken out was not usually specified in great detail, of course. The companies running the schemes would point to warehouses and barns with fresh paint and new logos on them. But none of the investors got to look inside.
They were empty, naturally. (I'm sure everyone saw that coming. But, according to one of the business courses I took in college, that lead to requirements that accountants take measures to verify the existence of inventory.
Bitcoin is like Tinker Bell. If enough people believe, then it has value.
Amy Castor and David Gerard on the current pop:
https://davidgerard.co.uk/blockchain/2024/03/06/bitcoin-hits-a-new-all-time-high-world-reacts-wow-that-things-still-around/