The value of Bitcoin has really taken a huge leap over the past few years. After some early bad press attached to criminals using the coins, Bitcoin has started to be seen on its own merits as a rare technological advance that might actually upend the traditional way of doing things. Instead of relying on banks and other financial institutions to help us with our every financial move, we can use Bitcoin and eliminate all of that, dealing with people on a one-to-one basis without any meddling from a third party. It is an exciting prospect, and that is what has driven the stunning rise in the value of the coins, making many investors rich in the process.
Of course, the old adage says that what goes up, must come down, and in the case of Bitcoin, investors are leery that it could be reaching the point where it is forming a proverbial bubble that could pop at any second. If you wish to invest in Bitcoin but are concerned about these signs and warnings, you should consider the assistance of a robot trader such as Bitcoin Code to help you sort it all out and proceed with caution when investing in these volatile coins. As for the bubble, you first have to understand what constitutes it and whether or not Bitcoin’s rise really fits the model.
1. What Is It?
A bubble is a proverbial term used by investors and market watchers when an asset is being driven up in value without any real reason behind it. Investors talk about fundamentals, which are the core characteristics of an asset that make it worthwhile. A bubble occurs when the value rises in the absence of these fundamentals to back it all up. People who are excited about the rising price jump on board to catch the wave, further inflating the bubble. The ultimate fear is that the asset will be exposed for the hollow shell it is, and the price will plummet and damage all of the investors.
- Why Bitcoin Could Be A Bubble
The concern about Bitcoin is that people are investing in it without having even the slightest understanding of what it is and what it does. Investors are reading stories about others of their kind getting rich and don’t want to miss out. But they haven’t studied anything about Bitcoin to see if it deserves investment backing.
- Why It Probably Isn’t
The funny thing is that these late-coming investors might actually be stumbling into something great. Because Bitcoin is based on sound technology, known as the blockchain, that does indeed the remove for financial supervision on the part of banks and the like. And it is also something that makes sense for people looking to eliminate unnecessary fees, protect their identities, and generally take back control of their personal finances. That is a fundamentally sound investment if ever there were one.
There certainly could be a time when Bitcoin’s value gets inflated beyond all reason. But we haven’t approached that point by a long shot, and the bubble doesn’t look like it will burst, or even form, anytime soon.