Is Bitcoin a Bubble or a Good Investment?

Is Bitcoin a Bubble or a Good Investment?

While Bitcoin breaks to new heights, pessimists have only to wonder: “When are we going to hear a pop?”

Now, bubble or not, Bitcoin seems deaf to negative feedback, focusing more on market outlook and the growing adaptation among the population. Bitcoin is currently in a state of rapid and even frightening rise.

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Therefore, it would be prudent to understand what will happen if there lurks a catastrophic mistake. And the Bitcoin market is anticipating pop.

The global Economy risk

What is waiting for those who have invested large amounts of money in case of Bitcoin collapse? Naturally, they will lose the money. More interesting is how this revolutionary money system affects the global economy.

Honestly, if Bitcoin suddenly disappears, the global economy will notice it. Bitcoin is barely noticeable in comparison with other major players. For example, the housing market is 500 times bigger than the Bitcoin market.

The cryptocurrency market capitalization is over $350 billion, making it almost insignificant in comparison with “dotcom bubble,” for example. "There's very little evidence of anyone borrowing money to buy cryptocurrency and if I was a bank or a lender, there's no way I would loan out money to do that."

Adrian Lee, senior lecturer in finance at the University of Technology in Sydney, explains the Australian example:

"So, it wouldn't affect the Australian dollar I'd say because nobody uses it at the moment. If you think about it, there are trillions of trading in the Australian dollar whereas Bitcoin is at most worth $200 bln in total, so it's hardly anything compared to the trillions in foreign exchange.”

Besides, the lessons were learned on the example of the fall of the real estate market in 2008. However, Bitcoin is another asset, and it does not seem that people borrow a lot of money when buying bitcoin.

Jason Potts, Professor of Economics, Royal Melbourne Institute of Technology: "There's very little evidence of anyone borrowing money to buy cryptocurrency and if I was a bank or a lender, there's no way I would loan out money to do that."

Could it be the flash?

Bitcoin's volume effect is not significant even for skeptics. Many experts call it a bubble because of the size and level of adaptation, but as mentioned above, Bitcoin is still small.

Potts explains why the possible collapse of Bitcoin will not hurt the global market and will not lead to severe consequences. At the same time, the professor confirms that Bitcoin is still too small and too young to be a bubble.

Potts compares Bitcoin with email at the early adaptation stage in 1994. "The sort of people who would hold superannuation funds … they're not in this market and might not be for some time," he added.

It will limit the extent of falling for the global economy in the gravest scenario: "If it crashes, it will only affect those people who speculate on it. People who use Bitcoin and exchanges may lose less money. But then again the exchanges don't require much overhead to run it, so if it fell they'd still be Okay," said, Lee.

Bubbles are for serious boys

Thus, it becomes clear that since Bitcoin has no severe effect on the global market, it just has no reason to collapse. The result will only take place for those who are investing money in Bitcoin. The similar risk is in the business investing. When the business fails, it does not look like the bubble pop. It is something different.

Apparently, the “bubble” talks continue to circulate, while Bitcoin tries to catch up to the markets and, of course, may collapse as the estate market. We don’t claim that Bitcoin collapse is impossible, but considering all the facts mentioned above, the collapse is highly unlikely.

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