Bitcoin Destined to Crash Worse Than Dotcom Boom?
According to Hong-Kong-based private investor Tiho Brkan, Bitcoin has risen faster than any asset class we have seen in the last 400 years.
A History of Bubbles
“The sharp bull markets including Tech Bubble of the last 90s, US stocks of 1920s, Oil in early 2000s and even the famous South Sea Bubble… do not even come close to the rise in bitcoin,” he said in a Twitter post on November 18, 2017. Having founded Altas Investor, his opinions are well-respected in the investing community.
In a blog post written back in May 2017, Clem Chambers iterates his certainty regarding the inflated aspects of the cryptocurrency.
“Anyone who rode the dotcom boom will recognize the symptoms: up like a rocket and down like a rock,” he writes. At the time, bitcoin was only worth $2,700, a far cry from the $10,000 mark reached this week, a mere seven months later.
An accurate measure of the impact of bitcoin would be to look at its market capitalization. Sitting at $190 billion at the time of this article (according to Coinmarketcap), this figure represents the number of bitcoins in circulation multiplied by its then-current price.
Negative Outlook as a Consensus
Tiho Brkan is not the only finance expert to have these misgivings about bitcoin and another cryptocurrency. Katsunori Sago judges the skyrockeing of bitcoin’s value to be, in fact, worse than previous economic booms which subsequently imploded.
As the Chief Investment Officer for Japan Post Bank, he states that a fair value of one bitcoin should be close to $100.
Besides, Sago explains his opinion that the dotcom boom was better than the current bitcoin surge for many reasons. He expressed one of them as follows:
“During the information technology bubble, we saw a rally in dotcom company shares,” he started. “But at least at that time, there were people using Yahoo or [Japanese internet firm] Rakuten — people were using their services. This time, I see quite a lot of people doing cryptocurrency businesses in my circle of friends. But I hardly know anyone in person who is trading cryptocurrencies, and I haven’t seen anyone using them in real life. So in that sense, it’s worse than the IT bubble.”
Dr. Shane Oliver, AMP Capital chief economist, shared the same viewpoints with Sago, although he did not have a guideline amount that he felt the cryptocurrency should be worth.
“It generates no income,” he said. “It’s a question of why a currency should be worth so much. Currency is usually seen as a medium of exchange or a store of value, but not an investment.”
With the world apparently in two minds when it comes to the potential of bitcoin, the debate is as heated as the age-old Apple versus Samsung supporters row. Each side has a valid reason for their thinking, yet until something drastic happens (or fails to happen), the future is yet to be seen.