Bitcoin: Value versus Speculation
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In the last several hours, the entire cryptocurrency market has lost about 20% of its value. Some are calling this the pop of a bubble. Below you can see several cryptocurrencies and their recent drop in price (source: CoinMarketCap, which is a weighted average of various crypto exchanges around the world).
Is this the pop of a bubble, then? No, it’s not. Or, to be precise: this recent drop has NOTHING to do with whether we are in a crypto bubble or not.
The only thing that has happened is simply a wild speculation.
Let me show you.
Take a look at this chart below: it shows the daily price of BTC in orange, and the monthly price in blue.
As you can clearly see, the daily price can fluctuate wildly; while the steady growth of Bitcoin price keeps going.
In fact, it’s easier to believe me by simply looking at the monthly price alone (1st day of every month), again in blue:
If you just look at this graph, what do you see? A very healthy growth.
For me, this is indicative of the perceived VALUE of Bitcoin. The orange line in the previous graph instead shows the PRICE of Bitcoin, which is heavily affected by speculation, and not properly correlated to VALUE.
In other words: besides wild speculation, Bitcoin is steadily growing. Will it keep growing? Hard for me to say. But what happened in the last hours is NO indication of it.
However, I am still personally very bullish on Bitcoin’s growth.
Why this note? To bring some sanity back into the discussion. Much needed, I guess.
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(disclaimer: I own cryptocurrencies).
(If you like my writings, you might subscribe to “Fabrica”)
