Bitcoin and the risk of a speculative bubble: what to know


Since its introduction Bitcoin has caused a stir, establishing itself as not only a financial but also an emotional phenomenon. And emotions, when investments are involved, it is important to keep them in check so as not to lose clarity in analysis.

It has been a while now that we have been hearing, for Bitcoin, about a speculative bubble. But are these really real risks? That's what we ask ourselves in this article in which we offer different (and reliable views on the matter), so as to invite you to make a reflection in which ... emotions are there, but they are each in the right place.

Bitcoin speculative bubble: ideas about it

 Puzzling several Bitcoin investors is the same structure of the monetary system, which is based on the fiat money, in which a currency has no intrinsic value and is not tied to something objective, such as a precious metal.

The other contextual element into which the cryptocurrency bubble fits is the fact that World central banks have seen increasingly expansionary policies, as evidenced by the fact that more and more money is being printed. This has seen investors lending money to states, buying bonds.

These measures regarding classic currencies have an impact on the volatility of Bitcoin and cryptos in general. We are at a time when the economy has particularly fragile conditions, to which paying attention is essential, virtual currencies or not. These are the factors on which analysts agree.  

Stanley Druckenmiller's point of view.

According to the well-known U.S. investor Stanley Druckenmiller cryptos are in a speculative bubble. What does this mean, exactly? That the prices of the most established cryptocurrencies, Bitcoin and Ethereum, are hitting record after record, as are altcoins. The problem is that the higher the rise, the more disastrous the descent, the collapse, promises to be.

Druckenmiller warns because there are already some previous, when it comes to Bitcoin, urging investors to look not only at the present but also at the future.

Rainer Zitelmann's reflection

No less interesting is the well-rounded analysis of Rainer Zitelmann, a German writer, entrepreneur and sociologist. Who highlights the pros and cons of Bitcoins, showing how history testifies that they are unsuitable currencies to serve as a store of value.

Zitelmann cites Elon Musk, an ardent supporter of Bitcoins, who has chosen Bitcoin payments for Tesla cars, at least as a matter of principle. He also argues that the word currency does not prove applicable to Bitcoins, a unique and peculiar phenomenon.

Some cases of bubble in crypto

The crucial point is. How investors understand bitcoins, for whom they are no more or less than an object of speculation: an opportunity to make good money, when one can guess the right timing.

Zitelmann places at the center of his analysis the fact that. speculative bubbles are not solely about Bitcoin: they have been there forever. It happened as early as 1630, the year during which there was the Dutch tulip bubble, which, as prices continued to rise, naturally burst.

But back to bubble phenomena in cryptocurrencies. An interesting case study is that of Shiba Inu (SHIB). The token experienced two major booms in 2021, with exchanges capable of generating booms greater than even Bitcoin. Equally sudden was the collapse, which is still ongoing.

Shiba Inu is not the only one. Another case is that of the token GME (GameStop), the so-called meme shares. The highest peak per share? Almost $400. Today, however? Steadily declining, around $153.

The examples we have cited to you start from the past and arrive in the present. That bitcoins are also in a speculative bubble there is no doubt. Are investments therefore at risk? Read on and you will find out!

Are investments at risk?

 Our analysis shows something that may seemingly be simplistic but is instead a simple, and therefore always valid, warning: all investments are at risk. Just because cryptocurrencies are constantly at risk of a bubble does not mean, therefore, that we should have more reserves against them.

Rainer Zitelmann places precisely the emphasis on this point, leading one to reflect on how having one's own ideas, for or against Bitcoins in this case, is important, but tying them to emotions does not lead: these need to be extraneous at the time when money is involved, it serves lucidity.

And Stanley Druckenmiller? The analyst responded with facts. If he was as critical as few towards Bitcoin, advising against investment at the height of the 2017-2018 speculative bubble (and rightly so, as it turned out later), today he chose to invest first. Confirming that the cryptocurrency bubble exists, certainly, but what really matters is being clear about how to invest.

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