Bitcoin Bubble Burst
What is a bubble burst?
Bubble occurs when the price of an asset is selling extremely higher than its actual value due to speculation, FOMO(Fear Of Missing Out), and scarcity. Therefore when it bursts , price crashes down to the actual value devoid of extreme speculation, FOMO etc, as per scarcity it depends on demand.
The total amount of Bitcoin compared to minted USD that is in circulation which is about $21 trillion while accounting for lost and misplaced Bitcoin tokens might eventually have only 16–14 million. The market cap of Bitcoin is just about $150 billion which is $0.15 trillion as compared to $21 trillion market cap of USD, so then we can say according to this Bitcoin hasn’t gotten to the point of the value bursting even if as it is not yet mass adopted around the world, we are still in the innovator stage of the product cycle.
Bitcoin has to increase the number of transactions and usage to actually reach the equivalent cap of USD, having backlog issues amounting to say about 150k transactions and with a transaction of 7tps, Bitcoin might not be able to get to the scale of USD usage.
Introducing Scaling solutions such as lighting network and Segwit, we will have to see where the transaction backlog will be then, Bitcoin will rely on off-chain transactions, reducing the activities on-chain. If these solutions don’t come through, mass adoption might be an illusion.
Equating to other payment systems like PayPal ($90 billion), MasterCard($150 billion), visa($200 billion) and AMEX ($80 billion), they have more daily transactions than Bitcoin and yet Bitcoin has more market cap than with fewer transactions. This is speculative as we wait for lightning network or a more robust scaling solution.
Compared to gold whose market cap is about $8 trillion , Bitcoin is still about $0.15t rillion. Bitcoin as a store of value compared to gold is less than 1% of the value of gold.
When will the bitcoin bubble burst?
So far personally I don’t see the price of Bitcoin bursting, just by the definition alone Bitcoin has burst severally but always revives with a very strong rally that takes it to new highs. Many have speculated the price to shoot off and beyond the moon , as far as the use case remains vital Bitcoin will always remain strong especially for those who believe in it as a store of value, aside as from being the first project in the sphere but also the one with the most brilliant developers , we can assume that as far as the blockchain gets adopted fully into the system Bitcoin will always remain relevant.
Even if it will burst we are still very far from the edge.
Are there individual bubbles in the market?
Of course, rating by transactions within the blockchain subtracting the trading account movements we can see that most blockchain projects don’t even have a transaction running in the chain that is a trade. Most of this bubble coins are new ICO with high profile developers, plenty promises, and no delivery. The total Crypto market cap roughly more than 50% of its value are bubbles.
As reported 95% of ICO that sprouted early last year have lost all or most of its value, as a start-up, it’s not expected that all should be successful that should be the realistic expectation of investors. ICO a special class that has evolved the VC model of funding start-ups has also indemnified the swiftness of scammers with superfluous projects that never meet project expectations.
Taking away these bubbles are the new regulations expected anytime soon from different countries, and if team leaders are held responsible for there actions we might be able to curtail this cancer in the sphere.
Which coins are likely to survive the burst.
Of course, Bitcoin will survive, it has been the longest coin since 2009, has robust support from engineers and researchers, easily the most decentralized and secured coin, it accounts for about 34% of total market capitalization and has a fairly useful user-case that accounts for its 200k transaction volume on its chain. For sure we know there are others out there Like Ethereum and others,.
To be safe from the burst or drowning in a scam ICO one must take all the criteria of investing in a start-up into account.Ever since the success of Bitcoin and Ethereum there have been lots of copies claiming they can do better, this are to be avoided.
