So, Bitcoin is value or fad… or Tulip mania ???
We say –
“Biggest bubble of all time .. ruining people across nations, geographies, races and ages ….’
Above graph simply explains what bitcoin has grown into. There is an intense competition between companies like Amazon, Google, Apple, Microsoft and others who every second are working on innovations, are strategizing on their future and then there are investors who bet invest on these companies and all of this takes decades.
And now there is Bitcoin and other cryptocurrencies who do nothing and only serve one purpose and that is money transfer for illegitimate or contraband things.Now there are two issues with bitcoin.
a) Instead of using it as a currency people have started holding it like gold.
b) Due to apps economy and ease of connectivity, the phenomena is prevalent across geographies. Anyone who is having some free time from college going kids to office guys and having access to bitcoin apps is trading bitcoins.
So what, People have made phenomenal money in bitcoins like following headlines….
Our view is easy money has been made on bitcoins and now it’s like 2007 – 2008 when the last man who bought the stock were the losers and they were like following people (In between a quote from 2007-08 as people forget history … But as long as the music is playing, you‘ve got to get up and dance. We’re still dancing,” …)
We believe with stories like above are floating around, its time to be cautious very cautious.
Are there any signs its a bubble …??
Bitcoins have all the flavors of a traditional bubble, but before we explore that a couple of statements…
- Billionaire investor Warren Buffett has joined the ranks of those who believe the market for bitcoin is in bubble territory.
According to MarketWatch, Buffett touched on the subject during an annual question-and-answer session held in Omaha earlier this month. While Buffett focused on a range of topics, he honed in on the cryptocurrency market during his remarks.
“People get excited from big price movements, and Wall Street accommodates,” he was quoted as saying. Describing bitcoin as a “real bubble,” according to the publication, Buffett also criticized the idea of applying a value to bitcoin.
2. Bitcoin may just be a ‘dangerous pricing game,’ says NYU’s valuation expert. NYU finance professor Aswath Damodaran said bitcoin hasn’t proven its usability as a currency yet. … If bitcoin does not prove its worth as a usable currency, its massive price surge is a “dangerous” game …
3.JPMorgan CEO Jamie Dimon says bitcoin is a ‘fraud’ that will eventually blow up. …JPMorgan Chase CEO Jamie Dimon took a shot at bitcoin, saying the cryptocurrency “is a fraud.” “It’s just not a real thing, eventually it will be closed,” Dimon said Tuesday at the Delivering Alpha …
So, why all these gurus are saying so. It’s very easy to understand just imagine following scenarios….
a) How do you value Bitcoins?Is it currency or Gold?
b) Its used basically like currency but people are using it as Gold and just not exchanging resulting in the high price.
c) More price is getting higher, more people are holding it leading a self-reinforcing bubble.The most common sign of a bubble.
d) Scenario, if governments make this virtual currency illegal, the value will be lost in a minute. Governments will ban these currencies as the government doesn’t want you to be rich and doesn’t favor illegal exchanges.They want control.
e) Scenario, people started releasing it’s not gold and currency, the bitcoin will lose its value. Also with every country is coming up with its own virtual currency, there are going to be thousands of currencies before all govt decides to ban it.
f) All bubbles like tulip mania, IT, 2007-08 have one thing in common, Retail or common people lose the most. as they came in last and the belief they are in having that they have struck a gold mine. A belief that this will make them rich without any hard work.
So, we at Shikhar capital believe Its one of the biggest bubble in the history … as Apps, Online payments, mobiles have made investments so easy. When the tide will turn there will only be sellers and no buyers, and how the drama will unfold will be interesting to watch as it will be added in history as
“Biggest bubble of all time .. ruining people across nations, geographies races ….’
The best thing about the bubble is “Actually, no one can see a bubble. That’s what makes it a bubble.”