For every social media darling claiming to have struck it rich with Bitcoin, there’s a prominent investor calling it a fraud or bubble. You’d probably want to trust Warren Buffett over @MrMoneyBags on Twitter, right? As the College Football Analyst, Lee Corso, likes to say, “Not so fast my friend!” The funny thing about bubbles is that they usually aren’t deemed as such until after they have burst. That makes pinning Bitcoin a bubble ready to burst very difficult. Following the housing market crash, Forbes wrote an article detailing the five steps of a bubble. The following will look at where Bitcoin may fit into the stereotypical bubble.
1) Displacement: A displacement occurs when investors get enamored by a new paradigm, such as an innovative new technology or interest rates that are historically low.
Bitcoin, or better yet, blockchain technology, seems to fit the bill here. Blockchain is being tabbed as an extremely disruptive technology for many industries. Many people see Bitcoin as the way to invest in the underlying technology.