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Last bitcoin prices season was a bubble?
Joseph Lubin, co-founder of ethereum, seems to think so. He said a lot in an interview with Bloomberg: "this is something we have seen so many times since 2009 when bitcoin was invented.We have seen increases and falls [in cryptocurrency prices] and what many people call a bubble and I would agree, "he said. According to him, there have been six big bubbles since bitcoin was released. "Every [bubble] was more epic than the previous one, but when you look back they look like pimples on a chart because the growth has been exponential," Lubin said.
Bitcoin's biggest price bubble dates back to 2013, when the cryptocurrency recorded a phenomenal increase of about 5.992% in a year. For the context, last year it rose about 1840%. However, a look at the bitcoin price chart since its inception demonstrates Lubin's point of view on bitcoin price bubbles that look like "pimples" due to the exponentially growing digital currency. (See also: The Bitcoin Bubble Final Over?)
There were two consequences of the bitcoin price bubble, according to Lubin. The first is a burst of liquidity in the cryptocurrency ecosystem due to the entry of "types of traders". "They are just the kinds of traders that are moving [prices]," he said.
The second consequence is explosive growth in the ecosystem. "Each bubble brings attention to our ecosystem," Lubin explained, adding that there was a "tremendous wave of activity" with each bubble. The increased activity brings more developers and infrastructure to the nascent field, with the result of innovation and development of new technologies. For example, Lubin explained that there was an increase of two orders of magnitude in the development and development of scalability technology to allow more transactions on the bitcoin network.
How similar is the increase in the price of Bitcoins to the Dotcom bubble?
Lubin also outlined the differences between the dotcom bubble at the turn of the century and the bitcoin bubble last year. "Things were so slow at that time that there was a collapse and steady growth over time," he said, referring to the failure of Internet-related actions in 2000 and the subsequent regeneration of the technology industry. During that time, Internet startups with no revenue and solid business models were listed on the stock exchange for the purpose of absorbing money from investors. (See also: 5 successful companies that have passed the Dotcom bubble). The dynamics and the rhythm of the cryptocurrency bubble are different, says Lubin. He suggests that a rise in crypto prices is generally followed by an accumulation of fundamental technology infrastructures and by a further correction due to investor concerns about the future of cryptocurrencies. "I absolutely expect a strong correlation between price and growth," Lubin said, adding that the growth of infrastructure within the crypto will once again boost prices.
Investing in cryptocurrencies and other initial coin offerings ("ICOs") is highly risky and speculative and this article is not a recommendation of Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since the situation of each individual is unique, a qualified professional should always be consulted before making any financial decision. Investopedia does not make any representations or warranties regarding the accuracy or timeliness of the information contained in this document.
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