We have all observed the incredible price fluctuations bitcoin has been reporting over this year alone. The crypto made it out of the bear market in September last year, and from then, investors have only been amazed by its explosion. Before the May dip happened, the world’s most invested-in crypto, Bitcoin had been registering such impressive gains. It got to an all-time high of $64,829 in April.
Bitcoin’s value so far into the year has only been taking its investors for a wild ride. Even with the awe-inspiring high, the coin still plummeted. The crypto suffered more losses after Elon Musk said that his company was no longer accepting Bitcoin payment since the crypto was not environmentally friendly. China also banned cryptocurrencies in the country, thus furthering the dip.
The growth observed in the crypto world has been such intrigue for the optimistic skeptics who believe Bitcoin will rise to $100,000. Those who still have faith in the coin are eagerly watching to see how everything will play out. The cynics, however, believe it is a very dangerous bubble. For now, we can’t tell whether the supporters or doubters are correct because of the volatility the crypto scene always shows. However, let’s look at both sides; the one in favor and the one against crypto.
What Are Bubble Characteristics?
Historically, all bubbles have some typical characteristics. Their valuations indicated a very minimal possibility of positive real return; thus, buyers base their case on something different. Market participants base their argument on the fact that we live in a different world right now. They claim that investors should not use history to guide what the future will be like in the crypto scene since it’s highly volatile.
Other standard features displayed by bubbles are the overblown growth story and irrational exuberance. Market analysts can see these two characteristics in Bitcoin.
The Argument In Favor Of Bitcoin.
From the beginning of 2020, Bitcoin has recorded a 700% growth rate. Michael Harnett, the chief strategist at Bank of America, warned that the whole cryptocurrency scene is most likely the mother of all bubbles. He claims even the housing prices before 2008 did bit have such a crazy high and low like the one the Bitcoin price is currently going through. The highs and lows are bubble characteristics.
Traditionally, a bubble comes up and disappears just as fast. Bitcoin has only been increasing in value ever since it was created. It has been over a decade, and crypto is still lurking around. Bitcoin does hold some intrinsic value. It trades for quite a significant value, but we still cannot determine its value.
Some governments do not back Bitcoin, which is such a disadvantage as they can quickly ban it as we saw in China. Some people also do not have much faith in Bitcoin as they would instead put their money in real-value assets like gold.
What’s Bitcoin’s Worth?
The best thing about Bitcoin is that it is very scarce. The limit on Bitcoins that can be mined is capped at 21 Million. The limited number of coins helps Bitcoin retain its value regardless of the economic environment.
Bitcoin does excel at being a suitable medium of exchange. Many corporations accept Bitcoin as a means of payment, garnering its popularity, thus increasing its value. Investing in Bitcoin has therefore been profitable for many investors.
The Bottom Line.
To conclude, if Bitcoin is a bubble or isn’t, it solely depends on Bitcoin’s worth.
Over the past year, Bitcoin’s value has been meteorically increasing. The crypto has faced a few setbacks, like the market crash that happened recently. A coin that had gotten to $63,000 price is now at $38,000. It is steadily rising, though, but we can see that was such a blow for many investors. The fast-rising and falling can point it out to be a bubble. The picture may be different, though, if you observe its growth over the years.
What To Expect In Five Years?
Bitcoin is still in the beginner’s stage of its life. There’s an uptrend in its price since it continues to attract many investors. According to the Bitcoin Up website, If the mining process of the coins is made more friendly to the environment, more investors are sure to gain interest in putting their money there.
It is impossible to predict Bitcoin’s worth in the next five years. Experts, however, believe that it can even get to as high as $400,000 per Bitcoin. For a ‘bubble,’ that is pretty impressive. The crypto is already being compared to gold, and that alone can tell you that it does have a lot of value. There are, however, too many factors at play in cryptocurrency and so no one can make a conclusive prediction.
Institutional and retail investor buy-ins are of such significance in the bull market. We know more people are getting into cryptocurrency.