10 ms·

Is Bitcoin a Bubble? Economists Say ‘Yes’

120 points by thisisit 9y ago

patrickaljord 9y ago
Must be the 96% of Economists who have no idea what cryptography is.
bhouston 9y ago
In the end Bitcoin is so similar to Gold. It is a means of storing wealth and is valued on a shared belief of finite quantities and that it is an effective/secure means of storing wealth. It is hard for me to call a shared belief a bubble, because there is a clear understanding I think now that there is no underlying fundamental asset value.
- hockeybias 9y ago
  I bet not all of the participants have a clear understanding...
- zerostar07 9y ago
  I presume the implication of calling it a bubble is that it will "burst".
- deleted 9y ago
  [deleted]
- zimablue 9y ago
  Gold has a floor value though, sure it has a value above that based on being used as a store of wealth but the whole thing is predicated on the fact that gold is actually useful and has thousands of years of human history of being valued.
  - lawlessone 9y ago
    bitcoin will still have a sort of floor value for the various illegal things it was and is still use for. Obviously though that is far far lower than what it is now.
    - zimablue 9y ago
      I see your point but even on that - there are alternative blockchains, we could all just swap to litecoins and send it to zero. If it were the only feasible crypto it would have some sort of floor I agree but factor in altcoins and it actually doesn't have any.
      - lawlessone 9y ago
        True, there are others, some with more privacy built in , bitcoin enjoys a network effect for now. That might change.
    - UncleMeat 9y ago
      Except there are other coins that are better for illegal transactions.
    - prostoalex 9y ago
      People who do various illegal things hate volatility. They are already dealing with a number of risks, they don’t need another one added to the mix, where the supplier/boss can bust their kneecaps if the underlying cryptocurrency just went through a 5% “correction”.
- kgwgk 9y ago
  > transfer wealth It works really well for that, for those cashing out.
- krrrh 9y ago
  Bitcoin is like gold, except we have alchemy, and an infinite series of new elements between 78 and 80.
  - lawlessone 9y ago
    brb buying bars of uranium...
- rhino369 9y ago
  I don't think Bitcoin is like gold at all because I don't think there is a common belief that "it is an effective/secure means of storing wealth." A small number of people think that now because Bitcoin is in a huge run up. If bitcoin crashes 90%, it suddenly stops being a "secure means of storing wealth" and, instead, is a means of throwing away your wealth. If the market psychology changes, bitcoin becomes worthless. Gold has the same problem, but has a huge historical record of actually being somewhat stable. And there is a price floor for practice demand of gold, though I'm not sure what that is.
- scottnyc 9y ago
  I'll disagree. Gold once mined will be there for us forever. Bitcoin once mined will need us to perpetually mine it to exist. Gold will survive a nuclear war. EMP blasts, Hard drive failures, viruses, quantum computing and the lack of an internet connection aren't real risks to gold. In the throws of WWIII, with buildings burning to the ground off in the distance, as you cross the border to mexico with just the clothes on your back, which would you rather line the seams of your jacket with: gold? Or a piece of paper with some numbers that unlocked your 'virtual currency'? Let's see how well that shared belief holds up then.
brndnmtthws 9y ago
Does this count as another "Bitcoin is dead" proclamation? We're already well over 200 obituaries: https://99bitcoins.com/bitcoinobituaries/ https://99bitcoins.com/bitcoinobituaries/
evanwise 9y ago
I'm committing the cardinal sin of commenting before I'm done with the article, but whenever this discussion comes up, I feel like asking: why not both? Could it be that Bitcoin is currently overvalued and in a "bubble", but it or something like it still may have huge value and utility in the long run? The idea that the Bitcoin bubble is something more like the Dot Com bubble than Tulipomania seems plausible to me.
- dumbfounder 9y ago
  Yes. Internet stocks were in a bubble in the late 90's. It burst but the Internet turned out just fine. The question is, when the crypto bubble bursts, will Bitcoin recover, or will it be something else?
  - RosanaAnaDana 9y ago
    I think the contents of that bubble will fill another, more technically useful crypto. Something with 0 cost transaction fees.
    - Vadoff 9y ago
      It's not currently possible to have a crypto with 0 fees that's both distributed/non-centralized as well as very secure against attacks. If there is, Bitcoin can easily incorporate the technology.
      - Jsarokin 9y ago
        I'd say IOTA might fit your criteria, although it's still early stage. I don't think bitcoin could integrate their tech since it's not a blockchain, but a DAG (what they call a tangle). Interesting stuff.
        gonzoflip 9y ago
        I have been following IOTA for a while now and while concept of IOTA is very neat, it appears that the community/leadership surrounding it are in shambles. The network is not really working unless you run a full node, and even then if you send your IOTA to an address you have transferred IOTA out of you can lose them forever. These issues make me very nervous about the whole project.
Megamex 9y ago
These statistics are as useful as the pre brexit and us presidency polls
- zerostar07 9y ago
  a lot less useful tbh
creaghpatr 9y ago
One more percent and they'll have 'scientific consensus' /s
zerostar07 9y ago
Genius does not come from consensus. The economist who knows what bitcoin is is probably in the 4%.
tedeh 9y ago
Well, there's already talk that Bitcoin is the biggest financial bubble in world history: http://www.zerohedge.com/news/2017-12-12/its-official-bitcoin-surpasses-tulip-mania-now-biggest-bubble-world-history?page=1 http://www.zerohedge.com/news/2017-12-12/its-official-bitcoi...
- excalibur 9y ago
  Well, we still have that apocalyptic "derivatives bubble" hanging over our heads, which is estimated to be around $1.5-2 quadrillion (with a q). I don't think Bitcoin is competing in the same league.
  - pocoloco 9y ago
    MarketWatch has an infographic that shows the relative sizes. It's originally from 2015 but it has as been updated for 2017. https://www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18 https://www.marketwatch.com/story/this-is-how-much-money-exi...
WalterSear 9y ago
Who could have expected 4% of economists to be holding bitcoin already?
jrimbault 9y ago
IMO, bitcoin is a commodity money, and history has moved on from those a long time ago. At most treat it like stock, and not as if it were money.
adamnemecek 9y ago
The one thing they aren't accounting for is that there really hasn't been anything like bitcoin. In most bubbles, eventually the whales start selling which triggers an avalanche, however bitcoin is distributed enough that this might not happen. Too many different people are interested in it doing well now. E.g. rich people in 3rd world countries, boy are they pumped for bitcoin. I've mentioned it before, and I was kinda laughed at but I legit believe that certain economic truth need to be reevaluated for software and crypto. You know how at tech companies, the economics are different from other companies? I can imagine the same being the case for crypto.
- dynofuz 9y ago
  recently posted 1000 people who own 40% of the BTC market https://news.ycombinator.com/item?id=15877838 https://news.ycombinator.com/item?id=15877838
  - adamnemecek 9y ago
    The real question is how active are these people.
    - lawlessone 9y ago
      Do many gyms accept bitcoin as payment?
  - Xixi 9y ago
    It's 1000 wallets, not people: there can be a lot of people behind a single wallet (exchange cold wallets, for instance).
- basedninja 9y ago
  Curious what you mean by "tech company economics are different". Thanks
  - adamnemecek 9y ago
    All your cost is upfront in R&D, manufacturing an additional copy of your product is free. There's more.
kiddico 9y ago
Everyone that I've talked to seems to be aware of the (seemingly) inevitable price drop, but that doesn't seem to be stopping them from buying in. Most people just assume they'll be able to sell what they have when the price drops before all the 'dumb' people have a chance to do the same. They just assume they'll be the lucky ones. I don't think everyone can be the lucky ones though. I think after this all calms down and a reasonable price is reached it'll be a bit safer to use as an actual currency. Pretty sure we were all saying that when bitcoin was around $200 though so maybe it won't ever settle.
- jandrese 9y ago
  That's textbook bubble behavior. One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.
  - googletazer 9y ago
    You don't understand how trading bitcoin works. Trading is not done on the chain, its the centralized exchanges which keep the books. Its instantaneous, with people who are involved in arbitrage between the exchanges keeping the prices level across all.
    - craigc 9y ago
      That assumes you have your coins on an exchange. If you have them in a wallet you would have to send them to the exchange before selling, and that process could take hours or days.
    - jo909 9y ago
      But only if you already have your bitcoins on the exchange. If you keep them in your own wallet you need a blockchain transaction to be able to trade them at all. That will effectively put a limit on the amount of bitcoin that is able to be sold quickly in a crash.
AznHisoka 9y ago
If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). They seem to be good at predicting things with known variables, but not with unknown unknowns. I'm making a contrarian bet that experts are wrong this time as well (at least in the near term). People are jumping the gun, trying to look smart and predict the right outcome. The same people that never predicted bitcoin would be this popular. If I'm wrong, so be it, I'll lose a few % of my net wealth.
- camillomiller 9y ago
  Bitcoin might indeed be a bubble. But what about cryptocurrencies in general? I think that even these economist wouldn't be so sure if they'd been asked a broader question without pinpointing bitcoin.
  - codebolt 9y ago
    In the grander scheme, it seems plausible that there will be one or a few cryptocurrencies of the current era that will withstand the test of time and emerge with large-scale adoption rates in various markets. But with BitCoins technical limitations I really don't see it being a mainstream medium of trade one or two decades down the line. With that conclusion in mind, it seems inevitable that the BTC market will cool off eventually. And my I would never put my money into something that I don't believe in over the long term. I would be more interested in an ETF or other derivative that tracked the value of a basket of viable cryptos.
  - monochromatic 9y ago
    Blockchain/cryptocurrency is going to be really useful and valuable. It would be an enormous coincidence if much of that value wound up being tied to bitcoin though.
- pedrocr 9y ago
  >If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). Be very careful with those conclusions. In both cases the predictions were that the elections were very close. Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all.
pteredactyl 9y ago
Seems to me international fiat currencies are the bigger, more pressing bubbles. But what do I know? How many people know about QE, NIRP, or PPT?
- grondilu 9y ago
  This. I'm amazed state currencies still have the slightest credibility. In the computer age, the least that can be asked about a currency is that the total amount in circulation should be public. And it's not. The monetary aggregates are only estimated, and we're supposed to trust the economists who do those estimations. And let's not forget about forgery : not later than today I was reading an article about fake euro coins, and there are lots of them. When you think about it, the fact that we still use pieces of non-precious metals and paper notes for money is ridiculous. They are certainly very easy to counterfeit for anyone with enough means and determination. The whole thing is a mess. Cryptocurrencies can not be forged and their ledger is public. That alone makes me trust them more than I trust state currencies.
- tbirrell 9y ago
  Fiat currencies are still reasonably stable compared to actual goods right now. I know that can and has changed in the past (pre/post WWII germany), but at the moment, they are not in a bubble. Not at the same level that bitcoin is, anyway. How do I know this? Well, because I can still get a gallon of milk or loaf of bread for ~$3. If I put that $3 into bitcoin, I'd get some fraction of a coin (roughly 0.0001). Which is all well and good until the bubble bursts, and suddenly milk is worth 0.1 bitcoins. Did milk suddenly become 1000x more valuable? No, bitcoin lost value. This is something I don't understand about people who say they "cashed out of fiat currency". Fiat currency is still what everything is valued by. The value of a gallon is milk is relatively stable. Compared to this, fiat fluctuates a little, and bitcoin is a drunk on a rollercoaster. Which, if you consider fiat currencies to be a bubble, would make me even more concerned for bitcoin as it is a bubble within a bubble.
  - existencebox 9y ago
    Just a comment to chime in with some interesting info. QE in the UK seems to have actually kicked into the inflation cycle. Commodity prices (butter was a big one, if I remember correctly, at >20% yoy) have been jumping alongside service costs (insurance). I'm sure that Brexit is _some_ sort of variable in this equation but I won't pretend to make heads or tails of how beyond that inflation is in fact happening in some places. [0][1] Given the level of concern there is over the "missing inflation" in USD that causes so much headscratching by the Fed WRT rate raises, I think the OP is fair to say that we should be at least somewhat concerned about the state of currencies during QE (My intuition as someone not in finance is that it's simply been "absorbed" somewhere in the system that doesn't trickle down to normal consumers, such that it doesn't manifest like the inflation they're looking for; would be curious if someone more informed could speak to this.); and more importantly, the position that a multi-year ZIRP regime puts us in to respond to the next crisis. Bitcoin is an obvious outlier for sure, and a correction would hurt. But compared to the populations currency exposure, bitcoin's pain would likely be much less widespread. [0] (because I trust reuters as a source) https://uk.reuters.com/article/uk-britain-economy-inflation/uk-inflation-hits-highest-in-nearly-six-years-peak-seen-soon-idUKKBN1E60YF https://uk.reuters.com/article/uk-britain-economy-inflation/... [1] (more fine grained breakdown from sketchier news site) http://www.trustnodes.com/2017/12/13/inflation-spikes-britain http://www.trustnodes.com/2017/12/13/inflation-spikes-britai...
RosanaAnaDana 9y ago
I really don't think cryptocurrency in general is a going anywhere; I don't think this is even the tip of the iceberg in terms of where this is going to lead. There are reason however, why bitcoin specifically might bubble and collapse. The main issue being the fact that at the moment its not reasonable to use bitcoin as if it were money, with the prime cause (in my eyes) being the cost of transactions. I do think bitcoin will collapse (not any time soon), but I think the contents of that bubble will find themselves in other, technically more useful cryptos. Not being able to move bitcoin around with out these ridiculous transaction fees is why bitcoin will eventually collapse. Its not (as) useful as a store of value in its current form than a store of value that doesn't have acost for its use.
- heurist 9y ago
  We need to give up on the idea of bitcoin being used as money. It wasn't designed in a way that would encourage holder to spend it like money until a stable valuation is found when everyone in the world is holding it. As Yellen said, it's a highly speculative asset. Small chance of massive yield, large chance of small failure.
KasianFranks 9y ago
Gotta love how the negative crypto articles rise to the top on HN immediately. What's not understood is that crypto is a way for the un-banked (1/3 of the people on earth who barely have clean water, toilets or telephones, yes telephones and that make $1/day) now have access and participation in a global trading platform. Disruption for the first time is happening to both VCs and traditional investment bankers and they are rekt. Be a contrarian.
- matt4077 9y ago
  The unbanked have absolutely no use for a volatile pseudo-currency with transaction costs >$20
  - KasianFranks 9y ago
    Ever heard of other crypto?
- samastur 9y ago
  I would be more willing to believe this if among many other things bitcoin price didn't rise so much. As it is, it is clearly mostly bought and not "traded" which suggest it is used as a store of value (or investment) and not currency. It might be that cryptocoins will perform that role some time in the future, but this is not what is happening now.
- darkstar999 9y ago
  Except that bitcoin transaction cost is what, $10 or $15 now? There's no way "unbanked" people will benefit from that, at all.
  - montecarl 9y ago
    Yes. For right now, the demand for transactions is greatly outstripping the fixed supply of transactions that the network can provide. Nobody has convincingly solved the problem (IOTA, I'm looking at you...). Altcoins don't have this problem yet either because they are not as widely used and those that can do more transactions per second have blockchains that would be growing very quickly in size if the blocks were close to full. None of the current globally distributed trustless ledgers cannot support a huge number of transactions per second. We will need new technologies, possibly on top of bitcoin, or through new technology.
scirocco 9y ago
4% are Bitcoin owners :)
porter 9y ago
Usually the same number of economists forecast continued growth right before recession.
AaronHester 9y ago
Bitcoin is a bubble but that doesn’t mean that you can’t make money investing in it. All you need is someone else to be the “greater fool” to purchase it from you. Just don’t get stuck holding bitcoin when the bubble collapses.
- virgilp 9y ago
  Same thing could be said about sub-prime loans. Or really - anything. If you have this kind of "God-like knowledge", even gambling is a great idea.
virgilp 9y ago
> 96% of Economists Say ‘Yes’ Oh God this means I was wrong... I should start buying bitcoin ASAP.
sschueller 9y ago
I saw an article of one economist comparing bitcoin to Lehman brothers and that it will burst just like Lehman did. How are these two in any way similar?
billmalarky 9y ago
Both the founder and lead dev of Ethereum and Litecoin think they are both significantly overvalued. Vitalik Buterin (Ethereum): https://mobile.twitter.com/VitalikButerin/status/940850137919836160 https://mobile.twitter.com/VitalikButerin/status/94085013791... Charlie Lee (Litecoin): https://twitter.com/SatoshiLite/status/940353265585160192 https://twitter.com/SatoshiLite/status/940353265585160192 I've been bullish on crypto past few years but it's gone too far. I've flipped to bear until the tech catches up.
- placeybordeaux 9y ago
  I was just reviewing the avg tx fee on major coins. Micropayments aren't possible on any widely accepted coin. BTC has hit 20 USD a tx (albeit without segwit). It's looking a little rough. Might be time for a draw back. EDIT: I was pulling together the avg tx fees from https://bitinfocharts.com/ https://bitinfocharts.com/ $BTC: 24.4 USD $ETH: 1.07 USD $BCH: 0.17 USD $LTC: 0.632 USD $DASH: 0.62 USD $XMR: 5.49 USD My other thoughts on the subject: https://twitter.com/placeybordeaux/status/941122240623423490 https://twitter.com/placeybordeaux/status/941122240623423490
  - azinman2 9y ago
    Bitcoin doesn’t HAVE to be used for micropayments to be useful.
    - ufo 9y ago
      At this point the transaction costs are making it unusable for most regular payments as well.
    - billmalarky 9y ago
      Absolutely true. However, if crypto doesn't scale one way or another, it's use case is _greatly_ diminished.
    - placeybordeaux 9y ago
      I sent my friends 50 bucks worth of BTC for christmas time. At that point the fees for regular tx were ~5 bucks so I just bundled them and payed less than a dollar per send, making sure to send the change into a segwit address. I missed someone so I went ahead and sent a one off from a segwit address. That was only 1 buck tx fee. Totally doable for a $50 tx. But if the valuations are anywhere close to proper we need to have significantly higher throughput. If I can't send someone 10 bucks on bitcoin it loses a lot of value for me. I've previously used it to pay for lunch/poker w/e when I don't have my wallet and someone that I am with is interested in it. Even litecoin is hitting 1 USD avg tx fee.
donquichotte 9y ago
Oh dear. I don't own any bitcoins, but I sure af don't trust the judgement of people who invent fantasy signal processing strategies like fibonacci retracement [1], support and resistance levels [2] and Elliott Waves [3]. Sincerely, a dude who does actual signal processing for stuff that has to work. [1] https://en.wikipedia.org/wiki/Fibonacci_retracement https://en.wikipedia.org/wiki/Fibonacci_retracement [2] https://en.wikipedia.org/wiki/Support_and_resistance https://en.wikipedia.org/wiki/Support_and_resistance [3] https://en.wikipedia.org/wiki/Elliott_wave_principle https://en.wikipedia.org/wiki/Elliott_wave_principle
- oli5679 9y ago
  None of those methods have mainstream credibility in the academic economics/finance community.
- merloen 9y ago
  What makes you think that those fantasy signal processing strategies were invented by (respectable) economists? Because they weren't.
- montecarl 9y ago
  I second your opinion about these goofy strategies. I have several friends and family members, who when they look at stock price charts see lots of patterns and think that you can analyze them using various kinds of simple formulas or rules and beat the market. This gets reinforced by people who have used these techniques "successfully" to make money. You usually don't hear from the sheepish retail investor who is losing 10% trying to swing trade; you hear from the few guys who got lucky. All of these approaches are just gambling with a pseudoscientific approach.
HHalvi 9y ago
If you think of it as a currency probably yes and i assume that is what most of these people are assuming it to be. But Bitcoin and other alt coins have suddenly become a way to hoard something digitally. Pretty sure if everyone wants to cash out their bitcoin "portfolio's" there is gonna be a lot of long term and short term plummets. Overvalued ? Over Hyped ? Over Sold ? Over Everything ? Sure , but a Bubble ? Lets wait till it all goes down shall we ?
porter 9y ago
Sean Snaith from UCF is quoted in the article calling bitcoin a tulip bubble. Back in 2007 I watched his presentation in person where he said the U.S. would experience a "soft landing" and nothing major. A few months later the stock market crashed 60%. Economists are terrible at predictions.
- slyfocks 9y ago
  You cherry-picked one poor prediction from a single (shoddy) economist and somehow conclude that economists in aggregate are terrible at predictions. That statement doesn’t even logically support a conclusion that Sean is terrible at predictions. It’s also entirely possible that Sean errs on the side of optimism given his 2007 prediction, in which case his alarmism over Bitcoin shouldn’t be immediately dismissed.
lpolovets 9y ago
An interesting data point can be found at https://twitter.com/charliebilello/status/938859025483141121 https://twitter.com/charliebilello/status/938859025483141121 The author of that tweet (a researcher at a pension fund) polled his followers several times about whether they thought BTC was a bubble. The higher BTC's price, the fewer people believed it was a bubble.
OscarCunningham 9y ago
I've seen a few estimates for what value Bitcoin would have if it did become a world currency (or suchlike), and they're all in the $500 000+ range. So the current price of around $20 000 is consistent with the theory that Bitcoin will succeed with probability 5% and go to zero with probability 95%. I don't think that's obviously wrong, so I'd say it's wrong to call it a bubble. And even if Bitcoin does go to zero that still doesn't prove that we were in a bubble now. The market is already 95% sure that that's what's going to happen!
- rhino369 9y ago
  I think a 5% chance of bitcoin becoming a world currency is obviously wrong. You also have to figure in discount rates.
  - OscarCunningham 9y ago
    >You also have to figure in discount rates. Yeah, and risk aversion which I think would be much more significant.
DrNuke 9y ago
It is still pioneers and early adopters time, people seeing bitcoin as the first possible single currency for the entire planet. We will see how it goes when the masses and legislators come. Utopian it is not anymore and even technically feasible nowadays, so we will have attempts.
- placeybordeaux 9y ago
  Bitcoin is likely going to remain the most conservative of all the cryptocurrencies. Even the most liberial of them is having trouble scaling to the current demand. The current demand is really quite low.
- slyfocks 9y ago
  My grandma bought some Bitcoin last week and she doesn’t even use the internet. Friends who are not tech-savvy are talking about Bitcoin often. It most definitely is not still “pioneers and early adopters time”—that idea seems to be Bitcoin propaganda aimed at potential new Bitcoin buyers on the margin.
  - tbirrell 9y ago
    This sounds like the Joe Kennedy Shoe Shine story.
deweller 9y ago
Look at the value of gold between 2001 and 2013[1]. There were multiple years with 20-30% gains. I grant that a +1500% gain in 1 year is a different animal. But combine the store of value along with rapid technological innovation in all cryptocurrencies (ICOs, alt-coins, etc). I submit to you that there could be something here besides baseless mania. 1. http://onlygold.com/Info/Historical-Gold-Prices.asp http://onlygold.com/Info/Historical-Gold-Prices.asp
rubenrails 9y ago
Did you guys see this thread on Twitter a couple of days ago? https://twitter.com/TedOnPrivacy/status/940588631709896704 https://twitter.com/TedOnPrivacy/status/940588631709896704 Have you had similar problems selling bitcoin? EDIT: saw -> see
- djsumdog 9y ago
  I've always wondered this. Even if you have $10k USD worth of BTC, you still need to find someone to buy it? What if you wanted to cash out $100k or $500k? At that point you need legal contracts, escrows, 3rd party verification, etc..
- chomp 9y ago
  Yes, I used breadwallet to sell some bitcoins, accidentally set the transaction fee at (what I'd later find out to be) ~10 satoshis/byte. Now I have ~$2300 locked up in the mempool, and no end in sight for these high transaction fees. Can't figure out a way to raise the fee. https://jochen-hoenicke.de/queue/#4d https://jochen-hoenicke.de/queue/#4d
  - option_greek 9y ago
    It should expire in 3-4 days. You can also try importing the keys to another compatible wallet and redo the transaction with higher fee.
    - chomp 9y ago
      Thanks! Currently trying to find a wallet that will let me double spend. Any recommendations?
      - option_greek 9y ago
        Actually I don't think any wallet will let you do that. How ever, you can install breadwallet on another phone/device (don't mess with your existing one) and restore with your backup seed (12 or 24 words one). Electrum is another good wallet for desktop that supports all kinds of seed words where you can again import your seed words and re-spend them. The newly installed wallets will let you spend it again because it has no way of knowing that you already spent it. Good luck.
rufusroflpunch 9y ago
In a related noted, 4% of economists are bitcoin holders.
andrewla 9y ago
It's completely possible for Bitcoin to be in a speculative bubble but also not overvalued. I'm somewhat bullish on Bitcoin, but there's no doubt that there's a speculative bubble -- people with no knowledge of Bitcoin other than its price history are getting more and more eager to invest to ride the wave. This is the definition of a speculative bubble. The main question is what side of the bubble we're on -- where are we relative to the point where Bitcoin has passed its fundamentals.
EGreg 9y ago
Doesn't this headline actually violate Betteridge's law?
- qbrass 9y ago
  By answering their own question, the headline doesn't end in a question mark, so Betteridge's law doesn't apply.
berberous 9y ago
Bitcoin is certainly in a speculative bubble. I think Ray Dalio (the hedgefund manager who runs Bridgewater) explained this very well in this clip: https://www.facebook.com/raydalio/videos/401164293638585/ https://www.facebook.com/raydalio/videos/401164293638585/ The gist of it is, is that if you look at the nature of the investor today, it is clear that this has become a giant speculative bubble. Investors do not understand what they are investing in. They are not sophisticated. They are not analyzing their investments. They are investing on the 'greater fool' theory. All of the above does not preclude the possibility that Bitcoin survives, is useful, and perhaps is even still long-term undervalued despite the current bubble-aspects. But the nature of the investor today means that the dynamics of the price today are currently being driven by bubble-like factors, and are almost certain to have a large (50-90+%) drop at some point. If you read crypto twitter, you will see that even the devs like Vitalik [0] and Vlad [1] are extremely wary of how much the price has risen given the level of development of the technology thus far. [0] https://mobile.twitter.com/VitalikButerin/status/940850137919836160 https://mobile.twitter.com/VitalikButerin/status/94085013791... [1] https://twitter.com/VladZamfir/status/941220330294644736 https://twitter.com/VladZamfir/status/941220330294644736
einrealist 9y ago
Many economists also say that the current economic state may be a bubble, an even worse than that one that popped in 2008. I think, Bitcoin is undervalued because it can provide a way out for unstable currencies (Venezuela, some African and Asian countries, maybe soon western countries) or to avoid regulations (China, Russia) and of course, for unlawful business (money laundry, blackhats, drugs). That's probably the real value drivers at the moment. The biggest risk is regulation. Exchanges have to operate somewhere. But I guess, its hard to regulate something that is global (looking at you tax heavens).
arkona 9y ago
Looks like professor bitcorn is back > trust me I’m an economist
seanwilson 9y ago
I'm curious how much of an understanding of coding and computer science gives you an edge here in terms of making money. It's weird seeing people on the news talking about different cryptocurrencies when they obviously don't understand the technical merits of each. For example, Litecoin and Bitcon differ by the block mining times and the hash function used and Ethereum allows more complex smart contracts etc. but these kinds of details aren't mentioned. Bitcoin seems to be facing scalability issues (in terms of the protocol and the community) but I'd be very surprised if the news picked this up.
- Rmilb 9y ago
  The crypto market trades more on sentiment first, then technicals.
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mr_dynamite 9y ago
by the same people who broke the economy on 2008... lets just trust them...
monochromatic 9y ago
It’s easy to spot a bubble. It’s much harder to predict when it’s going to burst.
mabbo 9y ago
I don't know whether bitcoin is a bubble or not, but I would love to see it pop and the twits who won't shut up about it lose all their money. It may never happen. If it does, I will feel schadenfreude.
davidw 9y ago
The take by this economist seems pretty sensible: https://johnhcochrane.blogspot.com/2017/11/bitcoin-and-bubbles.html https://johnhcochrane.blogspot.com/2017/11/bitcoin-and-bubbl...
Meekro 9y ago
"Experts" predicting bitcoin's impending doom is nothing new. Does anyone remember Professor Mark Williams, a top economist who is so well regarded that he has been called to testify before Congress many times? In late 2013, he predicted that bitcoin would crash from $1200 to under $10 within the next 6 months [1]. After he was proven wrong, he revised his claim to say that the crash would happen eventually. I guess he was smart not to attach another date to his prediction, lest he be humiliated a second time. Until these economists are willing to put testable specifics to their predictions (bitcoin will drop to under $X within Y weeks), or are at least taking short positions to back up their beliefs, no one should take them too seriously. In contrast, the Winklevoss Twins correctly predicted Bitcoin's rise and become Bitcoin billionaires in the process. But they're not selling because they think it will go up much further [2]. Unlike the economists here, the Winklevii are putting their money where their mouths are. Time will tell if they're right. [1] http://www.businessinsider.com/williams-bitcoin-meltdown-10-2013-12 http://www.businessinsider.com/williams-bitcoin-meltdown-10-... [2] http://www.businessinsider.com/bitcoin-winklevoss-twins-say-could-soar-20-times-trounce-gold-2017-12 http://www.businessinsider.com/bitcoin-winklevoss-twins-say-...
- JamesBarney 9y ago
  This is true of every bubble ever. No one knew how to predict when the real estate bubble was going to collapse. And they wouldn't have been able to make any specific predictions, despite real estate being an obvious bubble. It was very easy to see that the price did not reflect the fundamentals. And Bitcoin is similar. The fundamentals of Bitcoin do not support the price. Also in terms of putting your money where your mouth is, there isn't any reliable way to profit off of bubble's unless you know the timing. And that's very hard. There are no laws of the universe that keep Bitcoin from rising for another 12 years, or tripling in value before it crashes.
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  - AznHisoka 9y ago
    There are ways, like buying a put option on Overstock for June of 2018, or January of 2019, if you think it'll take more time: https://finance.yahoo.com/quote/OSTK/options?p=OSTK&date=1529020800 https://finance.yahoo.com/quote/OSTK/options?p=OSTK&date=152... One look at their performance graph this year, and you'll see it's almost correlated with bitcoin prices.
osrec 9y ago
Bitcoin is designed to be a bubble. I mean, I love the concept and have profited from it, but looking at the mechanics, it almost makes sense to buy and hold, as the money supply doesn't grow much. This sort of puts a deflationary pressure on prices (of goods, not bitcoin - bitcoin becomes ever more valuable as the money supply tends towards a constant), meaning hoarders are rewarded, thereby reducing supply further. I don't know for sure, but mass deflation doesn't really sound all that sustainable. Couple that with hype driven demand, and you have yourself a perfect little bubble! I've personally sold a lot of my holding, but I'm very excited to see how this plays out in the next few months. There will be a lot of lessons to learn, but the end of bitcoin (should that happen) will not be the end of a decentralised money - I genuinely believe society needs this.
mrb 9y ago
This WSJ survey is very deceptive. It worded the question to make it sound like they were asking if 2) was true, but the blog post title make it sound like 1). Let me explain: in my experience people mean two very different things by "bubble": 1) Bitcoin is a bubble: the entire technology is worthless and its long-term valuation is zero. 2) Bitcoin is in a bubble: currently in a bubble phase, will probably crash in the short-term, but the long-term potential and value of the technology is or may be real. (Just like there has been bubbles in the past: 2011, 2013, 2014: http://bitcoin.zorinaq.com/price/ http://bitcoin.zorinaq.com/price/ they have been corrected, but the price ended up always surpassing previous peaks)
cs702 9y ago
Keep in mind, many of these economists also say that no one, not even them, can consistently identify undervalued or overvalued liquid assets. By calling Bitcoin a "bubble" with such confidence, aren't they contradicting themselves?
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vasilipupkin 9y ago
Unless you have any predictive insight about when a bubble going to burst, it's essentially a meaningless term. Specifically, I mean, it doesn't tell you anything about what you should do. Suppose Bitcoin is a bubble but it won't burst until 2152. Well, in that case, I should buy it. If it's about to burst in the next few months to few years, then perhaps I should sell it. If you can't tell me when, then you can call it whatever you want, it's not an informative term.
- TheCowboy 9y ago
  There's a fallacy in there somewhere. It's like telling me that calling something gambling is a meaningless term because I can't tell you exactly when you will lose your money playing craps. I don't know exactly when. There's a random factor involved. There's even a chance you might come out ahead. The fact that you don't know when it will burst is just one problem with bubbles. You don't know if it will be 2152 or now. If you know it is a bubble because of a strong irrationally motivated valuation but still buy in, then you are gambling on not "if" but "when" the bottom will fall out.
  - vasilipupkin 9y ago
    I don't agree with your analogy. If you play craps, then given the odds, we can predict that you will lose money on average if you play a large number of games. That's a pretty specific statement. Which specific statement are we making when we call something a bubble?
    - TheCowboy 9y ago
      Bubble can be overused and become meaningless, but it can be a useful concept to consider when deciding if this is where you want to put your money. In my opinion, irrationally motivated valuation is key here. People buying Bitcoin as the future are taking a leap of faith that only comes true if enough people take that leap and do not abandon it. There is no underlying asset or intrinsic value, there is no government force backing it up. There is nothing people can point out to express why this particular cryptocurrency has value. This isn't an argument against the underlying technology, just the valuation of Bitcoin.
vthallam 9y ago
I always wonder how an opinion piece from WSJ or the economist can change the direction(few billion $) of the market to some extent. Especially in these markets which are partly running on mass hysteria.
craigc 9y ago
How would someone classify Bitcoin’s rise from $0.08 to $31 from 2010 to 2011 before dropping to $2 or its rise from around $100 to around $1200 and subsequent crash to around $200 from 2013 to 2015? I would say losing 85% to 95% of its value in a relatively short period of time after a large run up could be considered a bubble bursting. The thing that is interesting is that each time this has happened with Bitcoin the price settled somewhere ABOVE where it was before the last bubble. I do think Bitcoin is in a bubble right now, but I think it could go much higher (maybe $50-100k?) before crashing, and I think the price after the crash will not go below $5k or $10k. The current wave began around $1000. So what I think we are seeing is actually mass adoption of a new technology in waves that are increasing exponentially. There has never been anything like Bitcoin so it is difficult to use lenses of Bubbles in the past to explain what is happening with it.
root_axis 9y ago
It's obviously a bubble, just stop and think about it for a moment. P2P payments over the internet clearly have some utility, but the quantity of bitcoins owned has no relationship to its utility, thus, the incredible rise in price can be attributed almost entirely to speculation. The masses don't care about P2P payments (at least not as far as that concept might relate to cryptocurrency), they are engaged in a FOMO reaction to constant hype and the false narrative that bitcoin is going to be the future of money. It's not as if all these new bitcoin buyers are going to engage in some kind of novel economic activity or wealth creation, they are just going to hodl till they're ready to cash out. Certainly, it is clear that bitcoin's rise in price does not track with any sort of uptick in commercial activity by the masses... really, every sign points to a bubble.
mancerayder 9y ago
So one of the items that keeps coming back to awareness is the potential implications of the Tether fraud. For those few that haven't heard of this by now, Bitfinex is tied closely structurally (in terms of management and ownership) to the company that created Tether, the altcoin that claims to be backed in a 1:1 basis with a USD. Well, there've been mysterious USDT transactions, in regular intervals, that suggest that there's tens of millions of Tether being pumped into Bitfinex on a regular basis, which of course can be converted into BTC (and other coins). However, no one thinks it's likely due to the soured reputation of Bitfinex (their big hack, their inability to do business with a U.S. bank, among other things) that this is REAL USD being pumped into this suspicious company with ill-reputed owners. This has been mentioned on Bloomberg and other mainstream publications. So (if this is all true) what in the world will it mean reputationally that people have been pouring 800M of counterfeit coins into Bitcoin, and what does it mean economically? I can't wrap my head around that second question. [edit: updated last sentence of p2 for clarity)
mancerayder 9y ago
“Old Baron Rothschild’s recipe for wealth winning applies with greater force than ever to speculation. Somebody asked him if making money in the Bourse was not a very difficult matter and he replied that, on the contrary, he thought that it was very easy… “I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon.” (from https://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Operator https://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Opera...)
WheelsAtLarge 9y ago
Yes, it's a bubble but we've never had one where the whole world can be, and is, involved. This can go on for years before it falls. The key , for it to continue, is to make it VERY EASY for people to buy and sell. Once that's in place who knows when it will stop. All the naysayers can't see that.
zeep 9y ago
If a stock market crash was to happen, Bitcoin would go up or down? (the peak of 2007 look small when compared to the peak of 2017)
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120 points by thisisit 9y ago

Must be the 96% of Economists who have no idea what cryptography is.

In the end Bitcoin is so similar to Gold. It is a means of storing wealth and is valued on a shared belief of finite quantities and that it is an effective/secure means of storing wealth. It is hard for me to call a shared belief a bubble, because there is a clear understanding I think now that there is no underlying fundamental asset value.

hockeybias 9y ago
I bet not all of the participants have a clear understanding...
zerostar07 9y ago
I presume the implication of calling it a bubble is that it will "burst".
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zimablue 9y ago
Gold has a floor value though, sure it has a value above that based on being used as a store of wealth but the whole thing is predicated on the fact that gold is actually useful and has thousands of years of human history of being valued.
- lawlessone 9y ago
  bitcoin will still have a sort of floor value for the various illegal things it was and is still use for. Obviously though that is far far lower than what it is now.
  - zimablue 9y ago
    I see your point but even on that - there are alternative blockchains, we could all just swap to litecoins and send it to zero. If it were the only feasible crypto it would have some sort of floor I agree but factor in altcoins and it actually doesn't have any.
    - lawlessone 9y ago
      True, there are others, some with more privacy built in , bitcoin enjoys a network effect for now. That might change.
  - UncleMeat 9y ago
    Except there are other coins that are better for illegal transactions.
  - prostoalex 9y ago
    People who do various illegal things hate volatility. They are already dealing with a number of risks, they don’t need another one added to the mix, where the supplier/boss can bust their kneecaps if the underlying cryptocurrency just went through a 5% “correction”.
kgwgk 9y ago
> transfer wealth It works really well for that, for those cashing out.
krrrh 9y ago
Bitcoin is like gold, except we have alchemy, and an infinite series of new elements between 78 and 80.
- lawlessone 9y ago
  brb buying bars of uranium...
rhino369 9y ago
I don't think Bitcoin is like gold at all because I don't think there is a common belief that "it is an effective/secure means of storing wealth." A small number of people think that now because Bitcoin is in a huge run up. If bitcoin crashes 90%, it suddenly stops being a "secure means of storing wealth" and, instead, is a means of throwing away your wealth. If the market psychology changes, bitcoin becomes worthless. Gold has the same problem, but has a huge historical record of actually being somewhat stable. And there is a price floor for practice demand of gold, though I'm not sure what that is.
scottnyc 9y ago
I'll disagree. Gold once mined will be there for us forever. Bitcoin once mined will need us to perpetually mine it to exist. Gold will survive a nuclear war. EMP blasts, Hard drive failures, viruses, quantum computing and the lack of an internet connection aren't real risks to gold. In the throws of WWIII, with buildings burning to the ground off in the distance, as you cross the border to mexico with just the clothes on your back, which would you rather line the seams of your jacket with: gold? Or a piece of paper with some numbers that unlocked your 'virtual currency'? Let's see how well that shared belief holds up then.

brndnmtthws 9y ago

Does this count as another "Bitcoin is dead" proclamation? We're already well over 200 obituaries: https://99bitcoins.com/bitcoinobituaries/ https://99bitcoins.com/bitcoinobituaries/

evanwise 9y ago

I'm committing the cardinal sin of commenting before I'm done with the article, but whenever this discussion comes up, I feel like asking: why not both? Could it be that Bitcoin is currently overvalued and in a "bubble", but it or something like it still may have huge value and utility in the long run? The idea that the Bitcoin bubble is something more like the Dot Com bubble than Tulipomania seems plausible to me.

dumbfounder 9y ago
Yes. Internet stocks were in a bubble in the late 90's. It burst but the Internet turned out just fine. The question is, when the crypto bubble bursts, will Bitcoin recover, or will it be something else?
- RosanaAnaDana 9y ago
  I think the contents of that bubble will fill another, more technically useful crypto. Something with 0 cost transaction fees.
  - Vadoff 9y ago
    It's not currently possible to have a crypto with 0 fees that's both distributed/non-centralized as well as very secure against attacks. If there is, Bitcoin can easily incorporate the technology.
    - Jsarokin 9y ago
      I'd say IOTA might fit your criteria, although it's still early stage. I don't think bitcoin could integrate their tech since it's not a blockchain, but a DAG (what they call a tangle). Interesting stuff.
      - gonzoflip 9y ago
        I have been following IOTA for a while now and while concept of IOTA is very neat, it appears that the community/leadership surrounding it are in shambles. The network is not really working unless you run a full node, and even then if you send your IOTA to an address you have transferred IOTA out of you can lose them forever. These issues make me very nervous about the whole project.

Megamex 9y ago

These statistics are as useful as the pre brexit and us presidency polls

zerostar07 9y ago
a lot less useful tbh

creaghpatr 9y ago

One more percent and they'll have 'scientific consensus' /s

zerostar07 9y ago

Genius does not come from consensus. The economist who knows what bitcoin is is probably in the 4%.

tedeh 9y ago

Well, there's already talk that Bitcoin is the biggest financial bubble in world history: http://www.zerohedge.com/news/2017-12-12/its-official-bitcoin-surpasses-tulip-mania-now-biggest-bubble-world-history?page=1 http://www.zerohedge.com/news/2017-12-12/its-official-bitcoi...

excalibur 9y ago
Well, we still have that apocalyptic "derivatives bubble" hanging over our heads, which is estimated to be around $1.5-2 quadrillion (with a q). I don't think Bitcoin is competing in the same league.
- pocoloco 9y ago
  MarketWatch has an infographic that shows the relative sizes. It's originally from 2015 but it has as been updated for 2017. https://www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18 https://www.marketwatch.com/story/this-is-how-much-money-exi...

WalterSear 9y ago

Who could have expected 4% of economists to be holding bitcoin already?

jrimbault 9y ago

IMO, bitcoin is a commodity money, and history has moved on from those a long time ago. At most treat it like stock, and not as if it were money.

adamnemecek 9y ago

The one thing they aren't accounting for is that there really hasn't been anything like bitcoin. In most bubbles, eventually the whales start selling which triggers an avalanche, however bitcoin is distributed enough that this might not happen. Too many different people are interested in it doing well now. E.g. rich people in 3rd world countries, boy are they pumped for bitcoin. I've mentioned it before, and I was kinda laughed at but I legit believe that certain economic truth need to be reevaluated for software and crypto. You know how at tech companies, the economics are different from other companies? I can imagine the same being the case for crypto.

dynofuz 9y ago
recently posted 1000 people who own 40% of the BTC market https://news.ycombinator.com/item?id=15877838 https://news.ycombinator.com/item?id=15877838
- adamnemecek 9y ago
  The real question is how active are these people.
  - lawlessone 9y ago
    Do many gyms accept bitcoin as payment?
- Xixi 9y ago
  It's 1000 wallets, not people: there can be a lot of people behind a single wallet (exchange cold wallets, for instance).
basedninja 9y ago
Curious what you mean by "tech company economics are different". Thanks
- adamnemecek 9y ago
  All your cost is upfront in R&D, manufacturing an additional copy of your product is free. There's more.

kiddico 9y ago

Everyone that I've talked to seems to be aware of the (seemingly) inevitable price drop, but that doesn't seem to be stopping them from buying in. Most people just assume they'll be able to sell what they have when the price drops before all the 'dumb' people have a chance to do the same. They just assume they'll be the lucky ones. I don't think everyone can be the lucky ones though. I think after this all calms down and a reasonable price is reached it'll be a bit safer to use as an actual currency. Pretty sure we were all saying that when bitcoin was around $200 though so maybe it won't ever settle.

jandrese 9y ago
That's textbook bubble behavior. One caveat with Bitcoin is that the network is so slow (effectively just 3 transactions per second) that a crash would be spread out over time. If a panic starts you won't be able to get a slot to sell your bitcoins unless you pay an enormous transaction fee. It could be an interesting situation where the rich literally pay to get to the head of the line and avoid the crash.
- googletazer 9y ago
  You don't understand how trading bitcoin works. Trading is not done on the chain, its the centralized exchanges which keep the books. Its instantaneous, with people who are involved in arbitrage between the exchanges keeping the prices level across all.
  - craigc 9y ago
    That assumes you have your coins on an exchange. If you have them in a wallet you would have to send them to the exchange before selling, and that process could take hours or days.
  - jo909 9y ago
    But only if you already have your bitcoins on the exchange. If you keep them in your own wallet you need a blockchain transaction to be able to trade them at all. That will effectively put a limit on the amount of bitcoin that is able to be sold quickly in a crash.

AznHisoka 9y ago

If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). They seem to be good at predicting things with known variables, but not with unknown unknowns. I'm making a contrarian bet that experts are wrong this time as well (at least in the near term). People are jumping the gun, trying to look smart and predict the right outcome. The same people that never predicted bitcoin would be this popular. If I'm wrong, so be it, I'll lose a few % of my net wealth.

camillomiller 9y ago
Bitcoin might indeed be a bubble. But what about cryptocurrencies in general? I think that even these economist wouldn't be so sure if they'd been asked a broader question without pinpointing bitcoin.
- codebolt 9y ago
  In the grander scheme, it seems plausible that there will be one or a few cryptocurrencies of the current era that will withstand the test of time and emerge with large-scale adoption rates in various markets. But with BitCoins technical limitations I really don't see it being a mainstream medium of trade one or two decades down the line. With that conclusion in mind, it seems inevitable that the BTC market will cool off eventually. And my I would never put my money into something that I don't believe in over the long term. I would be more interested in an ETF or other derivative that tracked the value of a basket of viable cryptos.
- monochromatic 9y ago
  Blockchain/cryptocurrency is going to be really useful and valuable. It would be an enormous coincidence if much of that value wound up being tied to bitcoin though.
pedrocr 9y ago
>If there's 1 thing I've learned in the past 2 years, it's that experts can be deadly wrong (Trump being president, Brexit). Be very careful with those conclusions. In both cases the predictions were that the elections were very close. Trump winning the presidency when the best models we had gave him a 30% chance is not a failing of prediction at all.

pteredactyl 9y ago

Seems to me international fiat currencies are the bigger, more pressing bubbles. But what do I know? How many people know about QE, NIRP, or PPT?

grondilu 9y ago
This. I'm amazed state currencies still have the slightest credibility. In the computer age, the least that can be asked about a currency is that the total amount in circulation should be public. And it's not. The monetary aggregates are only estimated, and we're supposed to trust the economists who do those estimations. And let's not forget about forgery : not later than today I was reading an article about fake euro coins, and there are lots of them. When you think about it, the fact that we still use pieces of non-precious metals and paper notes for money is ridiculous. They are certainly very easy to counterfeit for anyone with enough means and determination. The whole thing is a mess. Cryptocurrencies can not be forged and their ledger is public. That alone makes me trust them more than I trust state currencies.
tbirrell 9y ago
Fiat currencies are still reasonably stable compared to actual goods right now. I know that can and has changed in the past (pre/post WWII germany), but at the moment, they are not in a bubble. Not at the same level that bitcoin is, anyway. How do I know this? Well, because I can still get a gallon of milk or loaf of bread for ~$3. If I put that $3 into bitcoin, I'd get some fraction of a coin (roughly 0.0001). Which is all well and good until the bubble bursts, and suddenly milk is worth 0.1 bitcoins. Did milk suddenly become 1000x more valuable? No, bitcoin lost value. This is something I don't understand about people who say they "cashed out of fiat currency". Fiat currency is still what everything is valued by. The value of a gallon is milk is relatively stable. Compared to this, fiat fluctuates a little, and bitcoin is a drunk on a rollercoaster. Which, if you consider fiat currencies to be a bubble, would make me even more concerned for bitcoin as it is a bubble within a bubble.
- existencebox 9y ago
  Just a comment to chime in with some interesting info. QE in the UK seems to have actually kicked into the inflation cycle. Commodity prices (butter was a big one, if I remember correctly, at >20% yoy) have been jumping alongside service costs (insurance). I'm sure that Brexit is _some_ sort of variable in this equation but I won't pretend to make heads or tails of how beyond that inflation is in fact happening in some places. [0][1] Given the level of concern there is over the "missing inflation" in USD that causes so much headscratching by the Fed WRT rate raises, I think the OP is fair to say that we should be at least somewhat concerned about the state of currencies during QE (My intuition as someone not in finance is that it's simply been "absorbed" somewhere in the system that doesn't trickle down to normal consumers, such that it doesn't manifest like the inflation they're looking for; would be curious if someone more informed could speak to this.); and more importantly, the position that a multi-year ZIRP regime puts us in to respond to the next crisis. Bitcoin is an obvious outlier for sure, and a correction would hurt. But compared to the populations currency exposure, bitcoin's pain would likely be much less widespread. [0] (because I trust reuters as a source) https://uk.reuters.com/article/uk-britain-economy-inflation/uk-inflation-hits-highest-in-nearly-six-years-peak-seen-soon-idUKKBN1E60YF https://uk.reuters.com/article/uk-britain-economy-inflation/... [1] (more fine grained breakdown from sketchier news site) http://www.trustnodes.com/2017/12/13/inflation-spikes-britain http://www.trustnodes.com/2017/12/13/inflation-spikes-britai...

RosanaAnaDana 9y ago

I really don't think cryptocurrency in general is a going anywhere; I don't think this is even the tip of the iceberg in terms of where this is going to lead. There are reason however, why bitcoin specifically might bubble and collapse. The main issue being the fact that at the moment its not reasonable to use bitcoin as if it were money, with the prime cause (in my eyes) being the cost of transactions. I do think bitcoin will collapse (not any time soon), but I think the contents of that bubble will find themselves in other, technically more useful cryptos. Not being able to move bitcoin around with out these ridiculous transaction fees is why bitcoin will eventually collapse. Its not (as) useful as a store of value in its current form than a store of value that doesn't have acost for its use.

heurist 9y ago
We need to give up on the idea of bitcoin being used as money. It wasn't designed in a way that would encourage holder to spend it like money until a stable valuation is found when everyone in the world is holding it. As Yellen said, it's a highly speculative asset. Small chance of massive yield, large chance of small failure.

KasianFranks 9y ago

Gotta love how the negative crypto articles rise to the top on HN immediately. What's not understood is that crypto is a way for the un-banked (1/3 of the people on earth who barely have clean water, toilets or telephones, yes telephones and that make $1/day) now have access and participation in a global trading platform. Disruption for the first time is happening to both VCs and traditional investment bankers and they are rekt. Be a contrarian.

matt4077 9y ago
The unbanked have absolutely no use for a volatile pseudo-currency with transaction costs >$20
- KasianFranks 9y ago
  Ever heard of other crypto?
samastur 9y ago
I would be more willing to believe this if among many other things bitcoin price didn't rise so much. As it is, it is clearly mostly bought and not "traded" which suggest it is used as a store of value (or investment) and not currency. It might be that cryptocoins will perform that role some time in the future, but this is not what is happening now.
darkstar999 9y ago
Except that bitcoin transaction cost is what, $10 or $15 now? There's no way "unbanked" people will benefit from that, at all.
- montecarl 9y ago
  Yes. For right now, the demand for transactions is greatly outstripping the fixed supply of transactions that the network can provide. Nobody has convincingly solved the problem (IOTA, I'm looking at you...). Altcoins don't have this problem yet either because they are not as widely used and those that can do more transactions per second have blockchains that would be growing very quickly in size if the blocks were close to full. None of the current globally distributed trustless ledgers cannot support a huge number of transactions per second. We will need new technologies, possibly on top of bitcoin, or through new technology.

scirocco 9y ago

4% are Bitcoin owners :)

porter 9y ago

Usually the same number of economists forecast continued growth right before recession.

AaronHester 9y ago

Bitcoin is a bubble but that doesn’t mean that you can’t make money investing in it. All you need is someone else to be the “greater fool” to purchase it from you. Just don’t get stuck holding bitcoin when the bubble collapses.

virgilp 9y ago
Same thing could be said about sub-prime loans. Or really - anything. If you have this kind of "God-like knowledge", even gambling is a great idea.

virgilp 9y ago

> 96% of Economists Say ‘Yes’ Oh God this means I was wrong... I should start buying bitcoin ASAP.

sschueller 9y ago

I saw an article of one economist comparing bitcoin to Lehman brothers and that it will burst just like Lehman did. How are these two in any way similar?

billmalarky 9y ago

Both the founder and lead dev of Ethereum and Litecoin think they are both significantly overvalued. Vitalik Buterin (Ethereum): https://mobile.twitter.com/VitalikButerin/status/940850137919836160 https://mobile.twitter.com/VitalikButerin/status/94085013791... Charlie Lee (Litecoin): https://twitter.com/SatoshiLite/status/940353265585160192 https://twitter.com/SatoshiLite/status/940353265585160192 I've been bullish on crypto past few years but it's gone too far. I've flipped to bear until the tech catches up.

placeybordeaux 9y ago
I was just reviewing the avg tx fee on major coins. Micropayments aren't possible on any widely accepted coin. BTC has hit 20 USD a tx (albeit without segwit). It's looking a little rough. Might be time for a draw back. EDIT: I was pulling together the avg tx fees from https://bitinfocharts.com/ https://bitinfocharts.com/ $BTC: 24.4 USD $ETH: 1.07 USD $BCH: 0.17 USD $LTC: 0.632 USD $DASH: 0.62 USD $XMR: 5.49 USD My other thoughts on the subject: https://twitter.com/placeybordeaux/status/941122240623423490 https://twitter.com/placeybordeaux/status/941122240623423490
- azinman2 9y ago
  Bitcoin doesn’t HAVE to be used for micropayments to be useful.
  - ufo 9y ago
    At this point the transaction costs are making it unusable for most regular payments as well.
  - billmalarky 9y ago
    Absolutely true. However, if crypto doesn't scale one way or another, it's use case is _greatly_ diminished.
  - placeybordeaux 9y ago
    I sent my friends 50 bucks worth of BTC for christmas time. At that point the fees for regular tx were ~5 bucks so I just bundled them and payed less than a dollar per send, making sure to send the change into a segwit address. I missed someone so I went ahead and sent a one off from a segwit address. That was only 1 buck tx fee. Totally doable for a $50 tx. But if the valuations are anywhere close to proper we need to have significantly higher throughput. If I can't send someone 10 bucks on bitcoin it loses a lot of value for me. I've previously used it to pay for lunch/poker w/e when I don't have my wallet and someone that I am with is interested in it. Even litecoin is hitting 1 USD avg tx fee.

donquichotte 9y ago

Oh dear. I don't own any bitcoins, but I sure af don't trust the judgement of people who invent fantasy signal processing strategies like fibonacci retracement [1], support and resistance levels [2] and Elliott Waves [3]. Sincerely, a dude who does actual signal processing for stuff that has to work. [1] https://en.wikipedia.org/wiki/Fibonacci_retracement https://en.wikipedia.org/wiki/Fibonacci_retracement [2] https://en.wikipedia.org/wiki/Support_and_resistance https://en.wikipedia.org/wiki/Support_and_resistance [3] https://en.wikipedia.org/wiki/Elliott_wave_principle https://en.wikipedia.org/wiki/Elliott_wave_principle

oli5679 9y ago
None of those methods have mainstream credibility in the academic economics/finance community.
merloen 9y ago
What makes you think that those fantasy signal processing strategies were invented by (respectable) economists? Because they weren't.
montecarl 9y ago
I second your opinion about these goofy strategies. I have several friends and family members, who when they look at stock price charts see lots of patterns and think that you can analyze them using various kinds of simple formulas or rules and beat the market. This gets reinforced by people who have used these techniques "successfully" to make money. You usually don't hear from the sheepish retail investor who is losing 10% trying to swing trade; you hear from the few guys who got lucky. All of these approaches are just gambling with a pseudoscientific approach.

HHalvi 9y ago

If you think of it as a currency probably yes and i assume that is what most of these people are assuming it to be. But Bitcoin and other alt coins have suddenly become a way to hoard something digitally. Pretty sure if everyone wants to cash out their bitcoin "portfolio's" there is gonna be a lot of long term and short term plummets. Overvalued ? Over Hyped ? Over Sold ? Over Everything ? Sure , but a Bubble ? Lets wait till it all goes down shall we ?

porter 9y ago

Sean Snaith from UCF is quoted in the article calling bitcoin a tulip bubble. Back in 2007 I watched his presentation in person where he said the U.S. would experience a "soft landing" and nothing major. A few months later the stock market crashed 60%. Economists are terrible at predictions.

slyfocks 9y ago
You cherry-picked one poor prediction from a single (shoddy) economist and somehow conclude that economists in aggregate are terrible at predictions. That statement doesn’t even logically support a conclusion that Sean is terrible at predictions. It’s also entirely possible that Sean errs on the side of optimism given his 2007 prediction, in which case his alarmism over Bitcoin shouldn’t be immediately dismissed.

lpolovets 9y ago

An interesting data point can be found at https://twitter.com/charliebilello/status/938859025483141121 https://twitter.com/charliebilello/status/938859025483141121 The author of that tweet (a researcher at a pension fund) polled his followers several times about whether they thought BTC was a bubble. The higher BTC's price, the fewer people believed it was a bubble.

OscarCunningham 9y ago

I've seen a few estimates for what value Bitcoin would have if it did become a world currency (or suchlike), and they're all in the $500 000+ range. So the current price of around $20 000 is consistent with the theory that Bitcoin will succeed with probability 5% and go to zero with probability 95%. I don't think that's obviously wrong, so I'd say it's wrong to call it a bubble. And even if Bitcoin does go to zero that still doesn't prove that we were in a bubble now. The market is already 95% sure that that's what's going to happen!

rhino369 9y ago
I think a 5% chance of bitcoin becoming a world currency is obviously wrong. You also have to figure in discount rates.
- OscarCunningham 9y ago
  >You also have to figure in discount rates. Yeah, and risk aversion which I think would be much more significant.

DrNuke 9y ago

It is still pioneers and early adopters time, people seeing bitcoin as the first possible single currency for the entire planet. We will see how it goes when the masses and legislators come. Utopian it is not anymore and even technically feasible nowadays, so we will have attempts.

placeybordeaux 9y ago
Bitcoin is likely going to remain the most conservative of all the cryptocurrencies. Even the most liberial of them is having trouble scaling to the current demand. The current demand is really quite low.
slyfocks 9y ago
My grandma bought some Bitcoin last week and she doesn’t even use the internet. Friends who are not tech-savvy are talking about Bitcoin often. It most definitely is not still “pioneers and early adopters time”—that idea seems to be Bitcoin propaganda aimed at potential new Bitcoin buyers on the margin.
- tbirrell 9y ago
  This sounds like the Joe Kennedy Shoe Shine story.

deweller 9y ago

Look at the value of gold between 2001 and 2013[1]. There were multiple years with 20-30% gains. I grant that a +1500% gain in 1 year is a different animal. But combine the store of value along with rapid technological innovation in all cryptocurrencies (ICOs, alt-coins, etc). I submit to you that there could be something here besides baseless mania. 1. http://onlygold.com/Info/Historical-Gold-Prices.asp http://onlygold.com/Info/Historical-Gold-Prices.asp

rubenrails 9y ago

Did you guys see this thread on Twitter a couple of days ago? https://twitter.com/TedOnPrivacy/status/940588631709896704 https://twitter.com/TedOnPrivacy/status/940588631709896704 Have you had similar problems selling bitcoin? EDIT: saw -> see

djsumdog 9y ago
I've always wondered this. Even if you have $10k USD worth of BTC, you still need to find someone to buy it? What if you wanted to cash out $100k or $500k? At that point you need legal contracts, escrows, 3rd party verification, etc..
chomp 9y ago
Yes, I used breadwallet to sell some bitcoins, accidentally set the transaction fee at (what I'd later find out to be) ~10 satoshis/byte. Now I have ~$2300 locked up in the mempool, and no end in sight for these high transaction fees. Can't figure out a way to raise the fee. https://jochen-hoenicke.de/queue/#4d https://jochen-hoenicke.de/queue/#4d
- option_greek 9y ago
  It should expire in 3-4 days. You can also try importing the keys to another compatible wallet and redo the transaction with higher fee.
  - chomp 9y ago
    Thanks! Currently trying to find a wallet that will let me double spend. Any recommendations?
    - option_greek 9y ago
      Actually I don't think any wallet will let you do that. How ever, you can install breadwallet on another phone/device (don't mess with your existing one) and restore with your backup seed (12 or 24 words one). Electrum is another good wallet for desktop that supports all kinds of seed words where you can again import your seed words and re-spend them. The newly installed wallets will let you spend it again because it has no way of knowing that you already spent it. Good luck.

rufusroflpunch 9y ago

In a related noted, 4% of economists are bitcoin holders.

andrewla 9y ago

It's completely possible for Bitcoin to be in a speculative bubble but also not overvalued. I'm somewhat bullish on Bitcoin, but there's no doubt that there's a speculative bubble -- people with no knowledge of Bitcoin other than its price history are getting more and more eager to invest to ride the wave. This is the definition of a speculative bubble. The main question is what side of the bubble we're on -- where are we relative to the point where Bitcoin has passed its fundamentals.

EGreg 9y ago

Doesn't this headline actually violate Betteridge's law?

qbrass 9y ago
By answering their own question, the headline doesn't end in a question mark, so Betteridge's law doesn't apply.

berberous 9y ago

Bitcoin is certainly in a speculative bubble. I think Ray Dalio (the hedgefund manager who runs Bridgewater) explained this very well in this clip: https://www.facebook.com/raydalio/videos/401164293638585/ https://www.facebook.com/raydalio/videos/401164293638585/ The gist of it is, is that if you look at the nature of the investor today, it is clear that this has become a giant speculative bubble. Investors do not understand what they are investing in. They are not sophisticated. They are not analyzing their investments. They are investing on the 'greater fool' theory. All of the above does not preclude the possibility that Bitcoin survives, is useful, and perhaps is even still long-term undervalued despite the current bubble-aspects. But the nature of the investor today means that the dynamics of the price today are currently being driven by bubble-like factors, and are almost certain to have a large (50-90+%) drop at some point. If you read crypto twitter, you will see that even the devs like Vitalik [0] and Vlad [1] are extremely wary of how much the price has risen given the level of development of the technology thus far. [0] https://mobile.twitter.com/VitalikButerin/status/940850137919836160 https://mobile.twitter.com/VitalikButerin/status/94085013791... [1] https://twitter.com/VladZamfir/status/941220330294644736 https://twitter.com/VladZamfir/status/941220330294644736

einrealist 9y ago

Many economists also say that the current economic state may be a bubble, an even worse than that one that popped in 2008. I think, Bitcoin is undervalued because it can provide a way out for unstable currencies (Venezuela, some African and Asian countries, maybe soon western countries) or to avoid regulations (China, Russia) and of course, for unlawful business (money laundry, blackhats, drugs). That's probably the real value drivers at the moment. The biggest risk is regulation. Exchanges have to operate somewhere. But I guess, its hard to regulate something that is global (looking at you tax heavens).

arkona 9y ago

Looks like professor bitcorn is back > trust me I’m an economist

seanwilson 9y ago

I'm curious how much of an understanding of coding and computer science gives you an edge here in terms of making money. It's weird seeing people on the news talking about different cryptocurrencies when they obviously don't understand the technical merits of each. For example, Litecoin and Bitcon differ by the block mining times and the hash function used and Ethereum allows more complex smart contracts etc. but these kinds of details aren't mentioned. Bitcoin seems to be facing scalability issues (in terms of the protocol and the community) but I'd be very surprised if the news picked this up.

Rmilb 9y ago
The crypto market trades more on sentiment first, then technicals.

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mr_dynamite 9y ago

by the same people who broke the economy on 2008... lets just trust them...

monochromatic 9y ago

It’s easy to spot a bubble. It’s much harder to predict when it’s going to burst.

mabbo 9y ago

I don't know whether bitcoin is a bubble or not, but I would love to see it pop and the twits who won't shut up about it lose all their money. It may never happen. If it does, I will feel schadenfreude.

davidw 9y ago

The take by this economist seems pretty sensible: https://johnhcochrane.blogspot.com/2017/11/bitcoin-and-bubbles.html https://johnhcochrane.blogspot.com/2017/11/bitcoin-and-bubbl...

Meekro 9y ago

"Experts" predicting bitcoin's impending doom is nothing new. Does anyone remember Professor Mark Williams, a top economist who is so well regarded that he has been called to testify before Congress many times? In late 2013, he predicted that bitcoin would crash from $1200 to under $10 within the next 6 months [1]. After he was proven wrong, he revised his claim to say that the crash would happen eventually. I guess he was smart not to attach another date to his prediction, lest he be humiliated a second time. Until these economists are willing to put testable specifics to their predictions (bitcoin will drop to under $X within Y weeks), or are at least taking short positions to back up their beliefs, no one should take them too seriously. In contrast, the Winklevoss Twins correctly predicted Bitcoin's rise and become Bitcoin billionaires in the process. But they're not selling because they think it will go up much further [2]. Unlike the economists here, the Winklevii are putting their money where their mouths are. Time will tell if they're right. [1] http://www.businessinsider.com/williams-bitcoin-meltdown-10-2013-12 http://www.businessinsider.com/williams-bitcoin-meltdown-10-... [2] http://www.businessinsider.com/bitcoin-winklevoss-twins-say-could-soar-20-times-trounce-gold-2017-12 http://www.businessinsider.com/bitcoin-winklevoss-twins-say-...

JamesBarney 9y ago
This is true of every bubble ever. No one knew how to predict when the real estate bubble was going to collapse. And they wouldn't have been able to make any specific predictions, despite real estate being an obvious bubble. It was very easy to see that the price did not reflect the fundamentals. And Bitcoin is similar. The fundamentals of Bitcoin do not support the price. Also in terms of putting your money where your mouth is, there isn't any reliable way to profit off of bubble's unless you know the timing. And that's very hard. There are no laws of the universe that keep Bitcoin from rising for another 12 years, or tripling in value before it crashes.
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- AznHisoka 9y ago
  There are ways, like buying a put option on Overstock for June of 2018, or January of 2019, if you think it'll take more time: https://finance.yahoo.com/quote/OSTK/options?p=OSTK&date=1529020800 https://finance.yahoo.com/quote/OSTK/options?p=OSTK&date=152... One look at their performance graph this year, and you'll see it's almost correlated with bitcoin prices.

osrec 9y ago

Bitcoin is designed to be a bubble. I mean, I love the concept and have profited from it, but looking at the mechanics, it almost makes sense to buy and hold, as the money supply doesn't grow much. This sort of puts a deflationary pressure on prices (of goods, not bitcoin - bitcoin becomes ever more valuable as the money supply tends towards a constant), meaning hoarders are rewarded, thereby reducing supply further. I don't know for sure, but mass deflation doesn't really sound all that sustainable. Couple that with hype driven demand, and you have yourself a perfect little bubble! I've personally sold a lot of my holding, but I'm very excited to see how this plays out in the next few months. There will be a lot of lessons to learn, but the end of bitcoin (should that happen) will not be the end of a decentralised money - I genuinely believe society needs this.

mrb 9y ago

This WSJ survey is very deceptive. It worded the question to make it sound like they were asking if 2) was true, but the blog post title make it sound like 1). Let me explain: in my experience people mean two very different things by "bubble": 1) Bitcoin is a bubble: the entire technology is worthless and its long-term valuation is zero. 2) Bitcoin is in a bubble: currently in a bubble phase, will probably crash in the short-term, but the long-term potential and value of the technology is or may be real. (Just like there has been bubbles in the past: 2011, 2013, 2014: http://bitcoin.zorinaq.com/price/ http://bitcoin.zorinaq.com/price/ they have been corrected, but the price ended up always surpassing previous peaks)

cs702 9y ago

Keep in mind, many of these economists also say that no one, not even them, can consistently identify undervalued or overvalued liquid assets. By calling Bitcoin a "bubble" with such confidence, aren't they contradicting themselves?

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vasilipupkin 9y ago

Unless you have any predictive insight about when a bubble going to burst, it's essentially a meaningless term. Specifically, I mean, it doesn't tell you anything about what you should do. Suppose Bitcoin is a bubble but it won't burst until 2152. Well, in that case, I should buy it. If it's about to burst in the next few months to few years, then perhaps I should sell it. If you can't tell me when, then you can call it whatever you want, it's not an informative term.

TheCowboy 9y ago
There's a fallacy in there somewhere. It's like telling me that calling something gambling is a meaningless term because I can't tell you exactly when you will lose your money playing craps. I don't know exactly when. There's a random factor involved. There's even a chance you might come out ahead. The fact that you don't know when it will burst is just one problem with bubbles. You don't know if it will be 2152 or now. If you know it is a bubble because of a strong irrationally motivated valuation but still buy in, then you are gambling on not "if" but "when" the bottom will fall out.
- vasilipupkin 9y ago
  I don't agree with your analogy. If you play craps, then given the odds, we can predict that you will lose money on average if you play a large number of games. That's a pretty specific statement. Which specific statement are we making when we call something a bubble?
  - TheCowboy 9y ago
    Bubble can be overused and become meaningless, but it can be a useful concept to consider when deciding if this is where you want to put your money. In my opinion, irrationally motivated valuation is key here. People buying Bitcoin as the future are taking a leap of faith that only comes true if enough people take that leap and do not abandon it. There is no underlying asset or intrinsic value, there is no government force backing it up. There is nothing people can point out to express why this particular cryptocurrency has value. This isn't an argument against the underlying technology, just the valuation of Bitcoin.

vthallam 9y ago

I always wonder how an opinion piece from WSJ or the economist can change the direction(few billion $) of the market to some extent. Especially in these markets which are partly running on mass hysteria.

craigc 9y ago

How would someone classify Bitcoin’s rise from $0.08 to $31 from 2010 to 2011 before dropping to $2 or its rise from around $100 to around $1200 and subsequent crash to around $200 from 2013 to 2015? I would say losing 85% to 95% of its value in a relatively short period of time after a large run up could be considered a bubble bursting. The thing that is interesting is that each time this has happened with Bitcoin the price settled somewhere ABOVE where it was before the last bubble. I do think Bitcoin is in a bubble right now, but I think it could go much higher (maybe $50-100k?) before crashing, and I think the price after the crash will not go below $5k or $10k. The current wave began around $1000. So what I think we are seeing is actually mass adoption of a new technology in waves that are increasing exponentially. There has never been anything like Bitcoin so it is difficult to use lenses of Bubbles in the past to explain what is happening with it.

root_axis 9y ago

It's obviously a bubble, just stop and think about it for a moment. P2P payments over the internet clearly have some utility, but the quantity of bitcoins owned has no relationship to its utility, thus, the incredible rise in price can be attributed almost entirely to speculation. The masses don't care about P2P payments (at least not as far as that concept might relate to cryptocurrency), they are engaged in a FOMO reaction to constant hype and the false narrative that bitcoin is going to be the future of money. It's not as if all these new bitcoin buyers are going to engage in some kind of novel economic activity or wealth creation, they are just going to hodl till they're ready to cash out. Certainly, it is clear that bitcoin's rise in price does not track with any sort of uptick in commercial activity by the masses... really, every sign points to a bubble.

mancerayder 9y ago

So one of the items that keeps coming back to awareness is the potential implications of the Tether fraud. For those few that haven't heard of this by now, Bitfinex is tied closely structurally (in terms of management and ownership) to the company that created Tether, the altcoin that claims to be backed in a 1:1 basis with a USD. Well, there've been mysterious USDT transactions, in regular intervals, that suggest that there's tens of millions of Tether being pumped into Bitfinex on a regular basis, which of course can be converted into BTC (and other coins). However, no one thinks it's likely due to the soured reputation of Bitfinex (their big hack, their inability to do business with a U.S. bank, among other things) that this is REAL USD being pumped into this suspicious company with ill-reputed owners. This has been mentioned on Bloomberg and other mainstream publications. So (if this is all true) what in the world will it mean reputationally that people have been pouring 800M of counterfeit coins into Bitcoin, and what does it mean economically? I can't wrap my head around that second question. [edit: updated last sentence of p2 for clarity)

mancerayder 9y ago

“Old Baron Rothschild’s recipe for wealth winning applies with greater force than ever to speculation. Somebody asked him if making money in the Bourse was not a very difficult matter and he replied that, on the contrary, he thought that it was very easy… “I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon.” (from https://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Operator https://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Opera...)

WheelsAtLarge 9y ago

Yes, it's a bubble but we've never had one where the whole world can be, and is, involved. This can go on for years before it falls. The key , for it to continue, is to make it VERY EASY for people to buy and sell. Once that's in place who knows when it will stop. All the naysayers can't see that.

zeep 9y ago

If a stock market crash was to happen, Bitcoin would go up or down? (the peak of 2007 look small when compared to the peak of 2017)

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