Novogratz Speaks Out On the Bitcoin Bubble

Photo by Nik MacMillan on Unsplash

Mike Novogratz, billionaire hedge fund investor, has been an outspoken voice in the cryptocurrency community and recently spoke out again about the crypto market and whether or not it is a bubble that will burst for good or can be a sustainable currency that will last.

Novogratz publicly stated that Bitcoin may be in a bubble right now in certain regions but cryptocurrency itself isn’t a bubble.

“Historically, manias or bubbles happen around things that fundamentally change the way we live. If it’s the railroad bubble or the Internet bubble, it really changed the way we live,” said Novogratz.

He compared cryptocurrency to the Internet technology and the dotcom bubble. The Internet was hugely innovative and changed the world as we know it. But the dotcom bubble produced many overvalued companies with few tangible assets behind them and many companies selling for billions of dollars purely because dot com was in the name of the company. The industry was rife with scams and fraudulent companies during the dotcom bubble.

But the Internet itself was not a bubble. The world has seen change in every industry, communication has been transformed, and data is processed at lightning speeds now. There was a bubble surrounding the Internet but the Internet itself was not a bubble.

Novogratz used this to relate to Bitcoin and cryptocurrency because there are many similarities between the dotcom era and the Bitcoin era. Now, there are again many fraudulent companies and scams in the space but that does not mean that Bitcoin or cryptocurrency in general is a scam.

Citigroup conducted research and found that most people have thought that many businesses that are successful now were bubbles when they first started. Companies like Tesla, Facebook, and Amazon were laughed off because the ideas were new and not yet accepted by the masses. But, they were not bubbles.

Photo by NASA on Unsplash

South Korea is in a slight bubble right now as the third largest cryptocurrency market in the world right behind the United States and Japan. This bubble has formed because many teenagers have been prone to jumping into investing into popular assets that have the potential to rise exponentially.

Bitcoin has had quite a few ups and downs over the past couple of weeks so many of those teenagers have lost most, if not all, of their money and some of them spent their parents money on these investments.

Investors that are more middle aged and seniors have put money into cryptocurrency without doing much research strictly because they have been told that it is the next hot investment that many people have already made money in.

These problems for newbie investors are short term problems according to Novogratz and will work themselves out in the long term. If Bitcoin was a true bubble then the individual economy would not be able to correct itself as often as it has to. As it stands right now, the cryptocurrency economy has righted itself many times over the past nine years and continues to do so. This is why it is not a bubble.

Disclosure: This blog post is for educational and informational purposes only and is based upon my individual experience. Please do your own research and do not invest any money that you cannot afford to lose. Consult with attorneys and tax professionals for any legal or tax related questions that you may have. This should not be considered to be investing, legal, or tax advice.

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