Bitcoin close to $2,000 is it a Bubble?

Bitcoin might have entered bubble territory. The price of a unit of the popular cryptocurrency rose to $1,738.79 on May 15, 2017.

That means Bitcoin is less than $262 from the $2,000 mark, which is a milestone. The growth in bitcoin values is extraordinary because it only reached the $1,000 mark around New Year’s Day. Bitcoin’s value has grown by nearly $800 in a little over five months.

Over the past year bitcoin values have grown by $1,288.25, according to Coinbase data. A bitcoin was trading at $459.48 on May 15, 2016; and $1,738.79 just 12 months later.

Is Bitcoin in a Bubble?

This sure looks like a classic asset bubble to me. Frenzied buying and hysteria about the value of assets such as gold is driving the relentless growth in Bitcoin.

Naturally investors will wonder when the bitcoin bubble will burst. That’s impossible to say because cryptocurrencies are such a new asset class. The newness is driving the bubble, because the underlying cause of the bitcoin price explosion is the growing popular acceptance of the digital currency.

People are rushing to get in because they are afraid the bubble will burst and they will be left out. Others are probably scared that other investments such as the stock market or real estate might crash first.

Something to remember is that a stock market or real estate crash will probably send bitcoin prices through the roof. The growing speculation about a stock or real estate crash in the United States and the epic fall of Chinese stocks over the past few years are driving this bitcoin bubble.

How high can Bitcoin Go

Bitcoin is definitely in a bubble but how high can the bubble go before it bursts? The disturbing answer here is far higher than you might think.

Contrary to popular belief, bubbles can go on for a long time. The Australian real estate bubble has been going on since 2001, and the US stock market bubble started in 2009. The Great Cotton Bubble in the Southern United States lasted for over 60 years from around 1800 to 1860. The only thing that ended it was the beginning of the Civil War in 1861.

Therefore it is highly likely that the bitcoin bubble will last for several years and boost the price of other cryptocurrencies with it. The other widely traded cryptocurrency; ethereum or ether, has seen even bigger growth than bitcoin.

Ether’s price grew by $78.88 between May 14, 2016 and May 14, 2017. Ethereum was trading at $10.35 in May 2016 and $91.97 a year later. That means $100 ether is likely sometime this month.

It looks as if the predictions of $3,000 bitcoin by the end of 2017 and half million dollar bitcoin by 2030 might be realistic. If such forecasts are proven to be prophetic expect to see bitcoin become one of the world’s most popular investments because the bubble is just beginning.

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