Is Bitcoin a bubble? Dealing with materiel

Against the backdrop of “Black Friday” and the rollback of the Bitcoin price by $5000-6000, a wave of panicked and malicious posts appeared on the Internet about how “Bitcoin is dead!” Let's try to figure out together whether this is so and whether there are real prerequisites for this.

On Thursday and Friday, December 21-22, 2017, there was a sharp drop in the bitcoin rate. This event was immediately dubbed “Black Friday”, and they began to diligently inflate the idea that “the cryptocurrency bubble has finally burst and Bitcoin has fallen into the abyss.” 

Is this so?

Let's first look at the Bitcoin price chart over the past year.

At the end of December 2016, the price of Bitcoin did not exceed $850-950. Today it is more than $14,000 after the “fall”. That is, objectively, the cost of one bitcoin has increased more than 14 times. Of course it's a spectacular failure. If such was the inflation of any fiat currency, the country would go bankrupt, right?

So where does this wave of panic come from, and cries about “the death of Bitcoin!”? It's simple. Around November 18, a sharp increase began from approximately 7,500 to 14,000 and then to 17,000 dollars per bitcoin. The cryptocurrency market is much more sensitive to news and rumors than the forex or stock market, and is inherently more volatile. 

Several serious news, such as bitcoin futures trading, opened by large American exchanges, caused, on the one hand, the revival of investors, and on the other hand, served as a reason even for people far from IT to learn about the existence of cryptocurrencies. In general, 2017 became a year of glory and recognition for the cryptocurrency community. All this together served as an impetus for the explosive growth of the exchange rate.

Is this a bubble? No. The emission of bitcoin occurs during the mining process, and it is simply impossible to “print” bitcoins in unlimited quantities. Therefore, everything we observe is exclusively market behavior. There is demand, limited supply - the price rises. And the deeper cryptocurrencies are integrated into the economy, the higher the demand will be. 

Of course, you can add a little conspiracy theory. The release of bitcoin on stock exchanges could not help but attract the attention of people with huge capital and an iron grip. It is possible that the drop in exchange rate that we observed was a game of a group of experienced “bears”. In this case, we will soon see a slow but steady increase in the exchange rate.. 

Well, the most likely scenario is 20,000 per bitcoin - this was a peak on the wave of rush demand, which was corrected by the market. In addition, the end of the year on the eve of the Christmas and New Year holidays is the time when small cryptocurrency holders dump some of their coins to buy gifts and organize New Year holidays. And after the new year we will again see the rate of $17,000 per Bitcoin, and then $20,000, and perhaps in two or three years $50,000.

Read also about the nuances of the functioning of digital currencies in Muslim society: Cryptocurrency - halal or haram?