The behavior of Bitcoin since its creation does not fit that of the typical model of a bubble. The pioneering cryptocurrency did not emerge as an investment vehicle but has behaved like a financial asset.
The most prominent argument by Bitcoin (BTC) opponents might be that they associate it with an economic bubble. Various experts describe it as a sharp price rise followed by an equally sharp fall.
The Bitcoin network is the predecessor of the most significant bubble experienced by the modern generation. That ghost has haunted and strengthened it as an alternative to traditional finance but has terrorized those not understanding that technology.
Many have described Bitcoin as the new bubble, as its value has risen meteorically over the last decade. Experts usually associate Bitcoin cycles with sudden increases and decreases, but the behavior pattern of BTC is not that of a bubble.
What Specialists Say about Market Bubbles
Venezuelan economist Henkel García believes it is not easy to determine whether Bitcoin constitutes a bubble. He says that it is as hard as knowing the preferences of the active participants of the market.
The limited supply of 21 million BTC is an argument that would contradict the conception of Bitcoin as a bubble. That would turn it into a deflationary and scarce asset, increasingly valuable in the economy.
The specialist disagrees with that concept, maintaining that the bubbles have also appeared in assets with a limited circulation/currency. He exemplifies the relative scarcity of a bubble with the case of tulips in Holland in 1620. Their price rose exorbitantly in less than twenty years but dropped once demand decreased.
Many analysts believe that it is hard to know whether or not an asset is a bubble. Instead, all markets have bubble behavior at some point, according to the Nobel Prize winner in Economics in 2013.
Robert Shiller states that it would be a mistake to assume that there are no bubbles in the market. He points out that they occur continuously and says that almost all actions in the aggregate value include them.
Bitcoin Does Not Emerge as an Investment Vehicle
Expert economist in cryptocurrencies Aaron Olmos argues that Bitcoin did not initially emerge as an investment vehicle. He says it is impossible to analyze as a traditional asset as it does not fit the category of a bubble.
Olmos also states that Bitcoin enjoys growing acceptance as a payment method and a refuge asset, making its value robust.
The analyst explains that an economic bubble bursts because price increases have no elements to justify them. Since its creation, it has shown that price corrections occur after a bullish period. He notes that those rise and correction cycles have sought to reach a price level corresponding to the market reality.
Bitcoin did not emerge as an investment vehicle, but it became a financial asset at the initiative of companies and individuals. Although Bitcoin did not receive a single role, some see it as a currency while others consider it a speculative asset. Many others think of it as a store of value, as it has multiple ways of being valuable to its users.
By Alexander Salazar
