Is Bitcoin a Bubble?

You’ve heard of Bitcoin. You’ve thought of getting Bitcoin. And then you saw the price trajectory of Bitcoin. You might be wondering “Can anyone still make money from Bitcoin?”

No one knew what the value was in 2009 when it started. Eight years later its at USD 4,000 plus. In other words, if you bought USD 1,000 of Bitcoin in 2009, that USD 1,000 would now be USD 4,000,000.

The question now is, where does Bitcoin go from here? Is it a bubble or does it still have room to grow? The answer depends on who you talk to. As an example, here are some of the things that people are saying.

“It’s a Bubble”

“It’s just created new value out of nowhere,” said Rob Moffat, a partner at Balderton Capital, a London-based venture capital firm who focuses on fintech. “There are no fundamentals behind any of this – it’s all based on public perception, so you can start to see some really strange phenomena.”

Bitcoin is a bubble. Like the¬†Dutch Tulip Mania bubble of the 17th Century. Prices have gone up solely on demand. And not on fundamentals. You can see what the BBC’s technology correspondent, Rory Cellan-Jones said about this.

“It still can Grow”

“Here’s why Bitcoin is not a bubble” – John Mcafee

“Bitcoin could hit USD 100,000 in 10 years” –¬†Kay Van-Petersen (analyst who correctly predicted Bitcoin would hit USD 2,000)

These are many more viewpoints on where Bitcoin is heading. And you should do your own research and form your own opinion of where Bitcoin is and where it will be. For me, I rely on these fundamentals and believe that Bitcoin still has room to grow:

  1. The adoption of Bitcoin and Cryptocurrency is on the rise. Recently Japan and Australia moved to officially recognise Bitcoin. There are many other countries preparing legislation to follow suit.
  2. The supply of Bitcoin is fixed. Bitcoin has a limit built into it. Only 21 million Bitcoins will be produced. After May of 2140 no more Bitcoins will be created. If demand and usage continues to grow, then with the supply squeeze, each Bitcoin will be even more valuable.
  3. Usage. We are moving to a cashless world. In many countries, cashless transactions are on the rise. With younger generations being used to cashless transactions, physical cash is more likely to disappear and electronic cash will become standard.

Based on these factors, I think that what we are seeing is a disruption in the financial world. Much like airbnb and uber disrupted traditional industries, Bitcoin and other cryptocurrencies will disrupt the financial industries. And as can be seen in those industries that were disrupted, there can be co-existence with the status quo. Inns and Hotels still operate and are profitable, taxis and other transportation systems are still operational.

What airbnb and ridesharing did was create a whole new economic opportunity for people with extra space or who were willing to give passengers a ride for a fee. Bitcoin and cryptocurrencies may find their adoption and acceptance amongst those who are looking for a better way of transacting or a better way of holding value.

I am confident that in the short term USD 5,000 per Bitcoin is achievable. USD 100,000 or USD 500,000, well that may take longer and will require more parties to be involved from governments on down, before it could become a reality. And if you share my sentiment, then you have to ask yourself, what’s the best way to get some Bitcoin?

(Please consult a licensed Fianancial Planner before making any financial decisions. The above are purely my own opinion and cannot be construed as financial advice.)