Ever since it gained even a shred of popularity and began gaining value, Bitcoin has been labelled as a bubble that will inevitably pop, leaving all investors and backers with nothing. Some of these arguments are rationally derived, and in a way, make sense. Others are flat-out ridiculous conjecture put forth by people who are either in competition with or do not understand Bitcoin.
When a well-respected financial analyst weighs in on Bitcoin, however, people tend to listen—and that is exactly what happened this week. Birinyi Associates released a report that compared Bitcoin to some of the largest financial bubbles in history, and the results were interesting, to say the least.
Birinyi studied a total of 10 events from history, and out of those 10 bubble events Bitcoin ranked 3rd. The two bubble events that ended up besting Bitcoin’s was a little-known bubble that took place in the 18th century and a Qualcomm stock surge from 1999.
The 18th century Mississippi Valley Bubble involved France’s attempt to develop the region we now know as the Missssippi River Valley, which included Louisiana and what is now Arkansas. To make what is a long story a bit shorter, a single company headed a majority of the development of the region. They vastly overstated the wealth of Louisiana and Arkansas and when doubting investors went to turn paper investments notes into coinage, the bubble burst.
The Qualcomm situation was equally as catastrophic, but took place in just a single day. One day, towards the end of 1999, Qualcomm’s stock surged more than 30% after analysts projected the stock to reach $1,000. It does not take an expert to figure out what happened next. The stock did not live up to the hype and investors pulled their money faster than a blink of an eye.
Birinyi even spoke about Bitcoin, saying that they’ve “got to think” that Bitcoin is a bubble. In the same breath, however, Birinyi went on to say, “Quite frankly, we’ve traded it a little bit. I don’t mind trading it, but I wouldn’t invest in it on a dare… I would not want to go home with a lot of bitcoin.”
It is not so much that Biriniyi is doubting that Bitcoin can be effective, but rather analyzing the cryptocurrency and its recent price movements. A lot of people are calling the US stock market, as it exists right now, a bubble that is on the verge of popping, but Birinyi does not think that is exactly the case.
Once again, we will simply have to wait and see how things play out, but the words of well-respected analysts such as Birinyi should not be taken lightly.
The cryptocurrency world is alive right now, and the prospect of it simply crashing seems far-fetched to some. For others, however, there is no doubt that Bitcoin will crash, it is just a matter of when.
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