What Is A Price Bubble?
The increase in the price of an asset above its fair market value results in the formation of a price bubble. We will exclusively look at the times when Bitcoin price boomed and the reasons for those bubbles.
Bitcoin Price Bubble
Many people believe that Bitcoin is not a stable currency and many times we see price rise beyond expectations forming a bubble. We have witness the biggest Bitcoin bubble in 2017 where prices went to $19,780 in December 2017 and fell 45% in no time. The investors like Warren Buffett have called Bitcoin a bubble. This is not something new to the financial markets.
Historical Examples of Traditional Price Bubble
- The Housing market in US during 1920 lead to the biggest depression in the history
- British Railway Mania in the1840s
- The famous dot-com bubble which led of rise of the technology relevant stocks from 1995 to 2000.
- Again the housing market in US during 2000-2006 lead to a big crisis.
Examples of Bitcoin Price Bubble
Below are periods in time where bitcoin prices fell significantly hinting of a Bitcoin price bubble.
- Bitcoin’s price reached an all time high of $19,700 on 17 December, 2017 but fell to $11,000 on 22nd December, 2017 within the space of a week.
- South Korea preparing to ban cryptocurrency trading on 12 January 2018 and price fell down by 12 percent in a day.
- Japan’s biggest OTC cryptocurrency market Coincheck was hacked on 26 January 2018. Nearly USD530 million of the NEM were stolen by the hacker. It was one of the biggest hack in the crypto world.
- On 7 March 2018, Binance API keys were compromised resulting in sudden dump in the Bitcoin and crypto prices.
- In March 2018, Facebook, Twiiter and Google banned advertisement for ICO (Initial Coin Offering) and that was perceived as the biggest blow to the trending crowd sale market. Banning crypto on social media was hit by another big price fall.
- In March 2020, Bitcoin’s market capitalization fell and price dropped under $4,000 during Covid19 and it was called the pandemic dump.
Inspite brutal bubbles so far, Bitcoin has always come back strongly and proved that it was never been a bubble. Bitcoin is volatile but it has been around for 10 years and it is here to stay. Bitcoin has been trending upwards since the Covid dump and believers in Bitcoin always argue that this time is different. Only time will tell if we will sustain these high prices or we are are about to see another roller-coaster ride.