Is bitcoin a Bubble waiting to burst?
First of all, I have to say that bitcoin-bubble conundrum has been there for some time ever since Bitcoin’s price hit $1,000. People have difficulty understanding the worth of the network and why it should be valued too much. Lets try and answer this basic question regarding bitcoin and whether it is a bubble or not.
A bubble is defined as an unrealistic growth pattern that ultimately results in the destruction of the entire system. A bubble’s increase cannot be justified except people’s participation in it. If a company becomes 10 time more valuable than its real worth, it is bound to crash. If that is the definition of a bubble, then bitcoin is no bubble at all.
The reason is that bitcoin is actually becoming more secure and popular with the increase in its demand. The reason is that it is becoming an alternative means of not just holding currency but also as a means of transaction that is better than the conventional means of transfer. Using conventional means of transfer to send money to both local and abroad destinations is extremely problematic. You have to follow procedures and all of the privacy of your information is compromised not just to the government but to private entities too due to the centralized form of data storage. It also takes a lot of time, even days depending on the amount you are trying to transfer.
Now bitcoin offers a solution to all of these problems. You can use it to send money anonymously (to a large extent), face no hassles regarding tax and regulations and the entire process is normally completed in a maximum of 30 minutes.
So, it is a viable alternative that is being adopted en-mass around the world for both currency holding and currency transfer purposes. The currency transfer business alone is worth $3 trillion while the bitcoin’s worth is around $40 billion as of this moment. So, instead of calling it a bubble, I would say it is in fact the opposite of a bubble and has much more room to progress further.
Since the bitcoin’s value is directly derived from the free market, it does undergo massive market corrections in total value. The reason is that the currency is being traded so often and the demand varies from one minute to another. While we can say that due to this excessive trading, bitcoin’s price is a little inflated but it is by no means a bubble waiting to burst. More so, if the market does loose a significant amount of value, you will still be entitled to your bitcoins since the network and your private keys are going nowhere.
So, bitcoin’s price is expected to shoot even further up in the coming months along with price corrections in between. But, it is possibly not a bubble waiting to burst.