With Bitcoins value raising over 1000% in the past 11 months there has been numerous comparisons to the Dutch tulip bubble of the early 1600's. It's hard not to be skeptical when you see the price of of Bitcoin and the speed at which it is rising, but is Bitcoin a bubble?
There are a few similarities between Bitcoin and any bubble including tulips. First off the speculation of what price Bitcoin can get to is creating hype and causing people to poor money into it. With predictions of one million dollars a coin becoming more and more common, people start investing more with the hopes of becoming rich. Now we are starting to see investment firms moving into the market which will drive the price up further and entice more people to buy into the speculation.
Next Bitcoin has no intrinsic value there is nothing to back up the price of the coin. With physical gold and silver there is a limited amount that a person can hold on to, and has been used for currency for centuries. Even fiat currency has the governments to back up the value and the paper has value when the governments collapse, although that value is that you can use it as toilet paper.
While critics of Bitcoin have valid points that should be considered when investing there is another side to Bitcoin. There are a finite amount of Bitcoin, 21 million coins is all there will ever be. Much like gold and silver more cannot be made when the final amount is mined. With central banks printing money and governments increasing debts uncontrollably people are looking to conserve their wealth in alternative ways. The lack of trust in institutional banking and instability in governments around the world is driving people to invest in Bitcoin and other cryptocurrencies.
When looking at the facts yeah Bitcoin could be the next tulip bulb, but it also might be the gold of the technology age. When it comes to investing there are always risks involved do your homework and never spend more than you can afford to lose.
