4 ms·

Bitcoin biggest bubble in history, says economist who predicted 2008 crash

39 points by dsr12 9y ago

adventured 9y ago
It makes for a convenient headline, however I fail to see how Bitcoin takes that crown versus Cisco in March of 2000. It was overvalued by a solid $450 billion, and that's coming up on two decades ago (for inflation adjustment purposes). Alternatively, there's PetroChina's trillion dollar valuation during the peak of the commodity bubble: http://www.nytimes.com/2007/11/05/business/worldbusiness/05iht-petrochina.1.8190012.html http://www.nytimes.com/2007/11/05/business/worldbusiness/05i... And if we're not talking about more individualized entities, the mother of all bubbles goes to the global real-estate market in 2004-2006. Or, possibly, the bond market today. The global real-estate market was overvalued by tens of trillions of dollars at its peak before the great recession. That rather comical gap between Bitcoin's value at the top and the overvaluation in just the US real-estate market in the Summer of 2005, speaks to the dramatic tone of the article existing solely for clickbait. If Bitcoin goes to zero, it will not matter very much on a global economic basis. It impacts exceptionally few people, fortunately. When the real-estate bubble collapsed, it nearly took down the global economy. That nearly bankrupted half the largest banks on the planet. It has taken until just the last few years for much of the developed world to truly recover or begin properly recovering.
elliotec 9y ago
People seem to conflate Bitcoin with cryptocurrency as a whole. It has been clear for a long time that Bitcoin's pace is unsustainable, especially with the exorbitant transaction fees and mining costs. But if you look at other cryptocurrencies like Etherium for example, you'll see an interesting differentiation. Not all cryptocurrency values are tied to Bitcoin. Etherium, at the time that I write this, is up 2.4% over a month ago while Bitcoin is down 37% over the same period. So, while I do think Bitcoin especially is pretty much definitionally a bubble, crashes and volatility are the nature of the game right now. We should be careful to lump digital currency as a whole into the the same category as Bitcoin. Bitcoin was the first, but probably wont be the last and certainly isn't the best. I think there is value in cryptocurrency that is difficult to see for many people past the black market stuff and the gambling aspect people put to it. If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way. I'm certain there is a reason these currencies exist beyond the sketchy reasons and I'm quite sure they are here to stay, bubble or not. There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later. It's not hard to imagine a (near) future where cryptocurrencies are a primary means of monetary transactions.
- datboitom 9y ago
  I agree, Ethereum is an example of something that took the concepts underpinning Bitcoin: distributed immutable legder and verifiable trust and created an platform that I think can be very interesting for building decentralized marketplaces. The technology is new so there are going to be hurdles but in terms of scaling and obviously a lot of speculation, but I think there are also a lot of socio/geopolitical factors that will continue to make cryptocurrencies a thing.
- wgerard 9y ago
  > If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way. I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be). > There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later. There's not really an alternative to houses (assuming you include e.g. apartments under that umbrella). You have to live somewhere, you don't have to use cryptocurrencies. I think a more apt analogy would be the dot-com bubble. If there truly is a use for cryptocurrencies (as there turned out to be for internet-based companies), they'll stick around and we'll see them again. That said, I also think it's a bit dangerous to rely on historical bubbles for predicting the future here. There are plenty of "bubbles" that never recovered at all, and we just moved on to the next thing entirely. We tend to forget about them.
  - icebraining 9y ago
    I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be). Venmo is great - for people in the US who only transact with others in the US. I had the same problem in Belgium - my local friends used Payconiq, which of course only works if you have a Belgian bank account.
    - wgerard 9y ago
      Sure, and I think this problem of transferring small amounts of money internationally painlessly is probably the strongest case for cryptocurrencies. But: 1) I don't think that's what cryptocurrencies want to be relegated to (a forex market essentially) 2) This also seems like a way around currency controls and things like AML compliance. If that became a problem at some point, I have to imagine governments will start putting the screws on any major exchange that interacts with fiat (and to some extent they already have).
deleted 9y ago
[deleted]
ve55 9y ago
>Roubini said the sharp fall was the beginning of a crash that would see the value of the digital currency plummet “all the way down to zero”. It's really hard to take someone seriously when they say the price is going to literally go to zero. It's possible to imagine crashes of 90% or even much worse for an asset like Bitcoin, but a market price of zero would suggest not a single person in the world is willing to pay anything at all for a Bitcoin. Absent a world-changing event like hashing being completely broken, the price will never be exactly zero. I can guarantee this since I myself would be willing to pay at least 1 cent for every BTC that exists, and I know that many would be eager to outbid me with that offer. If someone is so good at calling the exact extent of this crash, then they should place a short on Bitcoin. You don't have an excuse anymore. It's on regulated markets, unrelated markets, and everything in between. If you really think it's going to zero then put all of your money in a short and make sure not to close it until it gets there. Options are also available for some investors, which should be even more lucrative for you.
- hsljekskfh 9y ago
  don't you think that eventually people will basically only use a couple of coins, and that bitcoin could not be one of them? this is what most crypto guys i've talked to say. at most i can see one coin used for anonymous transactions and another for more legitimized purposes, and then maybe some with unique effects like filecoin could also be used. but bitcoin only has network effects and entrenched users, that's it. retired currencies like yen from the 1900s have a novelty collectors value because they're physical objects. coins don't have that, so a dead coin has literally zero value.
- sidibe 9y ago
  I think you are lacking imagination here, would you still pay 1 cent for BTC that everyone has completely abandoned and doesn't care about any more? I am pretty confident this will happen at some point in the (maybe distant) future.
  - elliotec 9y ago
    Everyone wont completely abandon it and not care anymore. That is basically beyond the realm of reality. I bet the majority of the people reading this would jump on buying thousands of bitcoin at that price, thus raising the price. It is very difficult, nigh impossible to actually imagine bitcoin not being worth anything.
FreeRadical 9y ago
Roubini was also advising to stay out of equities following the post crash recovery in 2009...
shinepl10 9y ago
another crypto idiot
hawktheslayer 9y ago
Antecdotal, but I knew something was wrong when a coworker of mine who thinks he can pick stocks bought into bitcoin at about 16k
ashelmire 9y ago
"Ah, surely this professional, educated economist has not studied bitcoin and doesn't understand crypto and the value of unregulated currency as well as me, your local pothead with no economics or tech education! And in any case, surely Etherium doesn't suffer from the same problems despite being fundamentally similar!"
- happyguy43 9y ago
  Pattern matching logic fails for both educated people and potheads alike. Bitcoin is unlike anything seen before and no one knows what’s going to happen with it.
OliverJones 9y ago
Take a breath. The biggest bubble in history? Compared to the mortgage and banking meltdown in 2008? History must be short.
maxander 9y ago
> “Policymakers and regulators are getting worried. Pretty much every G20 policymaker is talking about a crackdown,” Roubini told Bloomberg Television. “We can’t allow it to become the next Swiss bank account for use by criminals and people evading tax.” I've heard the "prevent the next Swiss bank account" thing a few times now, and it still looks like the most baldly corrupt aspect of this whole show. Actual Swiss bank accounts are still a thing people have, and are still being used by the wealthy to avoid taxes on a routine basis, and everyone knows it. But actual Swiss bank accounts have a stable legal status and no one's really going after them. What's the difference between "the next Swiss bank accounts" and the current ones? Perhaps it's that Bitcoin is available to much less wealthy classes of people. Or perhaps the right people have big Swiss accounts and haven't gotten around to diversifying into crypto yet. But I haven't seen a good account of the difference.
- Daishiman 9y ago
  Swiss banks can no longer rely on banking secret like they used to anymore.
polskibus 9y ago
Recent drops in cryptocurrency valuation coincide with futures settlements dates on CBOE and the other exchange. Perhaps someone is gaming the market and exploiting arb opportunity?

39 points by dsr12 9y ago

It makes for a convenient headline, however I fail to see how Bitcoin takes that crown versus Cisco in March of 2000. It was overvalued by a solid $450 billion, and that's coming up on two decades ago (for inflation adjustment purposes). Alternatively, there's PetroChina's trillion dollar valuation during the peak of the commodity bubble: http://www.nytimes.com/2007/11/05/business/worldbusiness/05iht-petrochina.1.8190012.html http://www.nytimes.com/2007/11/05/business/worldbusiness/05i... And if we're not talking about more individualized entities, the mother of all bubbles goes to the global real-estate market in 2004-2006. Or, possibly, the bond market today. The global real-estate market was overvalued by tens of trillions of dollars at its peak before the great recession. That rather comical gap between Bitcoin's value at the top and the overvaluation in just the US real-estate market in the Summer of 2005, speaks to the dramatic tone of the article existing solely for clickbait. If Bitcoin goes to zero, it will not matter very much on a global economic basis. It impacts exceptionally few people, fortunately. When the real-estate bubble collapsed, it nearly took down the global economy. That nearly bankrupted half the largest banks on the planet. It has taken until just the last few years for much of the developed world to truly recover or begin properly recovering.

elliotec 9y ago

People seem to conflate Bitcoin with cryptocurrency as a whole. It has been clear for a long time that Bitcoin's pace is unsustainable, especially with the exorbitant transaction fees and mining costs. But if you look at other cryptocurrencies like Etherium for example, you'll see an interesting differentiation. Not all cryptocurrency values are tied to Bitcoin. Etherium, at the time that I write this, is up 2.4% over a month ago while Bitcoin is down 37% over the same period. So, while I do think Bitcoin especially is pretty much definitionally a bubble, crashes and volatility are the nature of the game right now. We should be careful to lump digital currency as a whole into the the same category as Bitcoin. Bitcoin was the first, but probably wont be the last and certainly isn't the best. I think there is value in cryptocurrency that is difficult to see for many people past the black market stuff and the gambling aspect people put to it. If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way. I'm certain there is a reason these currencies exist beyond the sketchy reasons and I'm quite sure they are here to stay, bubble or not. There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later. It's not hard to imagine a (near) future where cryptocurrencies are a primary means of monetary transactions.

datboitom 9y ago
I agree, Ethereum is an example of something that took the concepts underpinning Bitcoin: distributed immutable legder and verifiable trust and created an platform that I think can be very interesting for building decentralized marketplaces. The technology is new so there are going to be hurdles but in terms of scaling and obviously a lot of speculation, but I think there are also a lot of socio/geopolitical factors that will continue to make cryptocurrencies a thing.
wgerard 9y ago
> If you've ever transferred Etherium to a friend to pay them back for the pizza they bought you, you'll feel that value in a small way. I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be). > There was a massive housing bubble, but we still have houses and they are, mostly, recovered above the peak of that bubble ten years later. There's not really an alternative to houses (assuming you include e.g. apartments under that umbrella). You have to live somewhere, you don't have to use cryptocurrencies. I think a more apt analogy would be the dot-com bubble. If there truly is a use for cryptocurrencies (as there turned out to be for internet-based companies), they'll stick around and we'll see them again. That said, I also think it's a bit dangerous to rely on historical bubbles for predicting the future here. There are plenty of "bubbles" that never recovered at all, and we just moved on to the next thing entirely. We tend to forget about them.
- icebraining 9y ago
  I think it's hard for people to appreciate this because this is already a pretty trivial task using tools like Venmo (or whatever your choice might be). Venmo is great - for people in the US who only transact with others in the US. I had the same problem in Belgium - my local friends used Payconiq, which of course only works if you have a Belgian bank account.
  - wgerard 9y ago
    Sure, and I think this problem of transferring small amounts of money internationally painlessly is probably the strongest case for cryptocurrencies. But: 1) I don't think that's what cryptocurrencies want to be relegated to (a forex market essentially) 2) This also seems like a way around currency controls and things like AML compliance. If that became a problem at some point, I have to imagine governments will start putting the screws on any major exchange that interacts with fiat (and to some extent they already have).

deleted 9y ago

[deleted]

ve55 9y ago

>Roubini said the sharp fall was the beginning of a crash that would see the value of the digital currency plummet “all the way down to zero”. It's really hard to take someone seriously when they say the price is going to literally go to zero. It's possible to imagine crashes of 90% or even much worse for an asset like Bitcoin, but a market price of zero would suggest not a single person in the world is willing to pay anything at all for a Bitcoin. Absent a world-changing event like hashing being completely broken, the price will never be exactly zero. I can guarantee this since I myself would be willing to pay at least 1 cent for every BTC that exists, and I know that many would be eager to outbid me with that offer. If someone is so good at calling the exact extent of this crash, then they should place a short on Bitcoin. You don't have an excuse anymore. It's on regulated markets, unrelated markets, and everything in between. If you really think it's going to zero then put all of your money in a short and make sure not to close it until it gets there. Options are also available for some investors, which should be even more lucrative for you.

hsljekskfh 9y ago
don't you think that eventually people will basically only use a couple of coins, and that bitcoin could not be one of them? this is what most crypto guys i've talked to say. at most i can see one coin used for anonymous transactions and another for more legitimized purposes, and then maybe some with unique effects like filecoin could also be used. but bitcoin only has network effects and entrenched users, that's it. retired currencies like yen from the 1900s have a novelty collectors value because they're physical objects. coins don't have that, so a dead coin has literally zero value.
sidibe 9y ago
I think you are lacking imagination here, would you still pay 1 cent for BTC that everyone has completely abandoned and doesn't care about any more? I am pretty confident this will happen at some point in the (maybe distant) future.
- elliotec 9y ago
  Everyone wont completely abandon it and not care anymore. That is basically beyond the realm of reality. I bet the majority of the people reading this would jump on buying thousands of bitcoin at that price, thus raising the price. It is very difficult, nigh impossible to actually imagine bitcoin not being worth anything.

FreeRadical 9y ago

Roubini was also advising to stay out of equities following the post crash recovery in 2009...

shinepl10 9y ago

another crypto idiot

hawktheslayer 9y ago

Antecdotal, but I knew something was wrong when a coworker of mine who thinks he can pick stocks bought into bitcoin at about 16k

ashelmire 9y ago

"Ah, surely this professional, educated economist has not studied bitcoin and doesn't understand crypto and the value of unregulated currency as well as me, your local pothead with no economics or tech education! And in any case, surely Etherium doesn't suffer from the same problems despite being fundamentally similar!"

happyguy43 9y ago
Pattern matching logic fails for both educated people and potheads alike. Bitcoin is unlike anything seen before and no one knows what’s going to happen with it.

OliverJones 9y ago

Take a breath. The biggest bubble in history? Compared to the mortgage and banking meltdown in 2008? History must be short.

maxander 9y ago

> “Policymakers and regulators are getting worried. Pretty much every G20 policymaker is talking about a crackdown,” Roubini told Bloomberg Television. “We can’t allow it to become the next Swiss bank account for use by criminals and people evading tax.” I've heard the "prevent the next Swiss bank account" thing a few times now, and it still looks like the most baldly corrupt aspect of this whole show. Actual Swiss bank accounts are still a thing people have, and are still being used by the wealthy to avoid taxes on a routine basis, and everyone knows it. But actual Swiss bank accounts have a stable legal status and no one's really going after them. What's the difference between "the next Swiss bank accounts" and the current ones? Perhaps it's that Bitcoin is available to much less wealthy classes of people. Or perhaps the right people have big Swiss accounts and haven't gotten around to diversifying into crypto yet. But I haven't seen a good account of the difference.

Daishiman 9y ago
Swiss banks can no longer rely on banking secret like they used to anymore.

polskibus 9y ago

Recent drops in cryptocurrency valuation coincide with futures settlements dates on CBOE and the other exchange. Perhaps someone is gaming the market and exploiting arb opportunity?