Some prominent figures argue that bitcoin is overpriced. Mark Cuban, BBC technology correspondent Rory Cellan-Jones, and currency expert Jim Rickards have all made this claim. But high prices don't au
Some prominent figures argue that bitcoin is overpriced. Mark Cuban, BBC technology correspondent Rory Cellan-Jones, and currency expert Jim Rickards have all made this claim. But high prices don't automatically signal trouble ahead, and they might even point toward growth. Bitcoin's market cap stands at $75.3 billion. Sizing up the market this way, it's hard to call bitcoin a bubble in the long run.
Jon Matonis, founding director of the Bitcoin Foundation and vice president of corporate strategy at nChain, sees the bubble talk differently. "Speculative bubbles definitely pop up in digital currencies, but mainly in altcoins," he told MiningPool. "Bitcoin has gotten older and steadier. The price swings aren't as wild, and it's starting to work like a safe harbor for money moving between other digital currencies."
History offers perspective. Tulips in 1600s Holland provide the textbook case. Between 1636 and 1637, tulip prices shot up. Traders emptied their savings and sold their land to buy more flowers. Then came the reckoning. Holders rushed to sell. Prices collapsed. The economy tanked. Demand for tulips persisted, though. The dot-com bust at the end of the 1990s left similar wreckage, and so did the 2008 housing crash. Both markets recovered. Bitcoin could follow the pattern.
The price action bears this out. Bitcoin dropped from over $3,000 in June to under $2,000 in July, a correction that spooked the market. Buyers kept coming anyway. The price has rebounded above $4,500. Research now suggests bitcoin could serve as a major reserve asset within a decade.
David Motta, an Internet entrepreneur and CEO of ACQURE Business Solutions, calls bitcoin bubbles healthy. "That Richard Branson was right about volatility," Motta said. "It's not bad. Money gets made from it. When you're positioned well in a bubble, it's a gift." He notes a caveat: "When people charge in without thinking, when they chase 'easy money' without digging into what they're buying, that's what inflates bubbles further."
Bubbles have run through financial history. Bitcoin, still young, should see some. Matonis points to their hidden benefit. "They build liquidity and create network effects," he said. "The volatility you see in bubbles creates opportunities for traders, and that brings more depth to the market."
