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Is Bitcoin a Bubble? Economists Say ‘Yes’

blogs.wsj.com

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Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#131

Post by Meekro »

"Experts" predicting bitcoin's impending doom is nothing new. Does anyone remember Professor Mark Williams, a top economist who is so well regarded that he has been called to testify before Congress many times? In late 2013, he predicted that bitcoin would crash from $1200 to under $10 within the next 6 months [1]. After he was proven wrong, he revised his claim to say that the crash would happen eventually. I guess he was smart not to attach another date to his prediction, lest he be humiliated a second time.

Until these economists are willing to put testable specifics to their predictions (bitcoin will drop to under $X within Y weeks), or are at least taking short positions to back up their beliefs, no one should take them too seriously.

In contrast, the Winklevoss Twins correctly predicted Bitcoin's rise and become Bitcoin billionaires in the process. But they're not selling because they think it will go up much further [2]. Unlike the economists here, the Winklevii are putting their money where their mouths are.

Time will tell if they're right.

[1] http://www.businessinsider.com/williams-bitcoin-meltdown-10-...

[2] http://www.businessinsider.com/bitcoin-winklevoss-twins-say-...

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#132

Post by DennisP »

billmalarky wrote: post #35

Both the founder and lead dev of Ethereum and Litecoin think they are both significantly overvalued. Vitalik Buterin (Ethereum): https://mobile.twitter.com/VitalikButerin/status/94085013791... Charlie Lee (Litecoin): https://twitter.com/SatoshiLite/status/940353265585160192 I've been bullish on crypto past few years but it's gone too far. I've flipped to bear until the tech catches up.

Vitalik thinks it's overvalued compared to what it can do today, but that just means the market is confident that it will be able to do much more later.

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#133

Post by osrec »

Bitcoin is designed to be a bubble. I mean, I love the concept and have profited from it, but looking at the mechanics, it almost makes sense to buy and hold, as the money supply doesn't grow much. This sort of puts a deflationary pressure on prices (of goods, not bitcoin - bitcoin becomes ever more valuable as the money supply tends towards a constant), meaning hoarders are rewarded, thereby reducing supply further. I don't know for sure, but mass deflation doesn't really sound all that sustainable. Couple that with hype driven demand, and you have yourself a perfect little bubble! I've personally sold a lot of my holding, but I'm very excited to see how this plays out in the next few months. There will be a lot of lessons to learn, but the end of bitcoin (should that happen) will not be the end of a decentralised money - I genuinely believe society needs this.

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#134

Post by jandrese »

googletazer wrote: post #106
jandrese wrote: post #53

Earlier quoted context omitted.

That's textbook bubble behavior. One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.

You don't understand how trading bitcoin works. Trading is not done on the chain, its the centralized exchanges which keep the books. Its instantaneous, with people who are involved in arbitrage between the exchanges keeping the prices level across all.

Historically keeping your coins on an exchange is the most effective way to have them stolen. I would hope most bitcoin users would have learned their lesson by now.

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#135

Post by 21 »

azinman2 wrote: post #91
Alex3917 wrote: post #73

Earlier quoted context omitted.

> Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all. How accurate the "best models" were isn't really relevant to the accuracy of the predictions of experts as a whole. The media was running that Clinton had a 98% chance of winning the morning of the race.

Sounds like the model was correct. We just fell into the 2%.

Today: My model says that I have a probability of 98% of making money by buying this stock tomorrow.

Tomorrow: I lost money. I guess I just fell into the 2%.

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#136

Post by eloff »

craigc wrote: post #117
hectorr1 wrote: post #112

Earlier quoted context omitted.

Bubble concerns worth listening to on crypto usually talk about the price getting to far ahead of the tech, network congestion, tx volume, scaling solutions, hard and soft forks, governance challenges, and regulatory uncertainty. Bubble concerns not worth listening to talk about lack of transparency, the fact that not backed by anything, hacks, and of course tulips. Since I can't view the WSJ Economist Survey crossta…

I agree. As soon as anyone starts comparing crypto currencies and Bitcoin to tulips I tune out. It is a sign that they clearly do not understand what they are talking about.

Because bitcoin and tulips have nothing in common? Bitcoin is a commodity, tulips are a commodity. Tulips went through a particular phase of hype with a famous bubble (and crash). It's not irrational to look at bitcoin through that lens. Bitcoin might be new tech, but commodity markets and the human psychology and greed that drive them are old as dirt. Those who ignore history are doomed to repeat it.

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#137

Post by beering »

darkstar999 wrote: post #38
Akujin wrote: post #20

Earlier quoted context omitted.

Tulipmania lasted 6 months. Bitcoin is now 8 years old. Stop comparing Bitcoin to flowers. It's not even close to the same thing.

But the bitcoin mania has only been going on within the past year.

There were at least two previous Bitcoin manias and bubbles. I remember a lot of hype when it hit $70 (from single-digit prices), and then again when it hit $1000. Both times people said it was a bubble, and then the bubble popped.

Re: Is Bitcoin a Bubble? Economists Say ‘Yes’

#138

Post by mrb »

This WSJ survey is very deceptive. It worded the question to make it sound like they were asking if 2) was true, but the blog post title make it sound like 1). Let me explain: in my experience people mean two very different things by "bubble":

1) Bitcoin is a bubble: the entire technology is worthless and its long-term valuation is zero.

2) Bitcoin is in a bubble: currently in a bubble phase, will probably crash in the short-term, but the long-term potential and value of the technology is or may be real. (Just like there has been bubbles in the past: 2011, 2013, 2014: http://bitcoin.zorinaq.com/price/ they have been corrected, but the price ended up always surpassing previous peaks)

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