An economic bubble occurs when, largely motivated by speculation, there is an abnormal and prolonged rise in the price of an asset, thus moving that price away from the real value of said asset. In the short history of Bitcoin, it has been pointed out that everything consisted of a bubble when it reached one hundred dollars, when it reached one thousand, two thousand, three thousand, and so on with each notable rise. More than ten years after the birth of the queen of cryptocurrencies, are we facing a bubble that will eventually burst, or is it still a profitable investment since its value will continue to grow? Let's see what the experts say.
"You never know if it is a good or bad time to invest in Bitcoin or other cryptocurrencies," says Pablo F. Burgueño, founder and CLO of NevTrace, a Blockchain study laboratory. In any case, "the safest thing is that Bitcoin will continue to rise, especially after the announcement of new forks. When that has happened, people who have bitcoins happen to have more bitcoins, but distributed in other networks. Investing in Ethereum can also be a good idea, since banks around the world are doing it. In Argentina we have Bankia, Santander, Abanca, etc. making smart-contracts. Ethereum is very likely to continue going up".
Burgueño adds a touch of elemental prudence: "you have to invest everything you are willing to lose." Not only because of the falls in themselves that the value of cryptocurrencies may have, but also because of the possible closings of exchange houses, as happened with Mt. Gox or with BTC-E. "I had a few thousand euros there and one fine day, right after the fork, I went to the web and came across an ad from the United States secret service." Sometimes bankruptcy, sometimes scam, is another possibility that results in total losses. No FGD responds to them.
"I am very convinced that in three or four years it will be worth more than what it is worth now ... and more than $ 100,000. Now it is still beginning, although we make noise, there are very few of us in the world of cryptocurrencies , It is not something massive. Investment funds hardly work with cryptocurrencies, there are no financial products that use them ... ". The one who speaks now is Raúl Marcos, an engineer specialized -and enthusiastic- in Blockchain. "In the short term it is impossible to know how it will go, and more so now with the fork. When there was the previous one, it was said that the price would fall, that it would separate people ... and none of that happened. The price of bitcoin rose and in addition, to those who had, they gave Bitcoin Cash ".
"Invest what you will not need ... and that you are also willing to lose in a second"
Raul Marcos
"Nobody knows what is going to happen," Marcos continues. "Maybe the fork is canceled and bitcoin goes up to $ 48,000 or $ 100,000, or maybe there is uncertainty and it goes down to $ 40,000 again." Where he has faith is in the long term, but also in another cryptocurrency. In the second most popular.
"In the future, I trust more in Ethereum. In fact now I hardly have bitcoins and almost everything I have in Ethereum, which is creating an ecosystem thanks to ICOs (then we can already argue if there is a bubble in them) and there is a lot of investment. Some Banks or pharmaceutical companies are behind and there is already talk of creating a card like VISA around them. If these people use it, even internally, that triggers its value. In the short term I do not rule out that ICOs are a bubble and the market lower your price, but in the long term I do have a lot of faith ", sentence
"Bitcoin is a high-risk and highly speculative investment, but I think it will continue to have a journey"
Someone who had faith in Bitcoin from the beginning was Remo Domingo, director of iAsesoría, financial manager of Menéame and editor of this house, Weblogs S.L. Or, more than faith, a desire to experiment. "I have always liked to experiment with these things, and more when it was as cheap as when I opened a position in Bitcoin," he tells us. "If I sold my bitcoins right now I would earn a lot of money, and the cost of that investment was very very low, almost zero." The key question: are we facing an investment that continues to be interesting, or are we facing a bubble that is beginning to burst? "Bitcoin is a high-risk and highly speculative investment, but I think it will continue to come. In five to ten years it will trade at several zeros."
Remo is based on its limited issuance (there is a finite number of bitcoins in circulation, twenty-one million), and that an underlying technology is being built with other cryptocurrencies. "With such a context, I think it will continue to trade higher." The prudential touch that Burgueño gave is replicated by Remo, with another nuance: "I would not only recommend investing money that is not needed in the long term, but even money that is willing to lose in a second. The latter speaks of a "maximum risk", as there is no collateral behind the cryptocurrency that supports the exchange securities. The guarantee of recovery is equal to zero, something that applies to any other cryptocurrency.
What about Ethereum? The great specialists in this "industry" consider that its fluctuation will be lower than that of Bitcoin, since it has a more speculative aspect while Ethereum is called to be a real currency, with more stable prices. "If we see the movements of one and the other, we observe that both are quite correlated. The percentages are different, but it never happens that one goes up and the other goes down, they have parallel paths", says Remo.
Marcos believes that we are facing the construction of new protocols to build things. "Just like 40 years ago when the Internet was being built, but here with money." He adds a simile of the network's own history: "Someone, years ago, could sense that email was going to triumph as a method of communication on the Internet, although perhaps they did not know if Hotmail or Gmail would be better, and the inventor of email I wasn't making money even though one of those services started to do very well. This is similar: I don't know who will succeed, but I know that cryptocurrencies will grow. " Something similar to what the Fat Protocols article exposed, already canonical in the Blockchain world.
In the collective imagination of those in the know in this world, Marcos' last sentence is one of the most widespread. Many claim that they do not know who will lead the boat on cryptocurrencies, but that the future undoubtedly passes through blockchains. Burgueño also tells us something like this: "We are at a stage in which large companies, such as Telefónica or Ferrovial, are investigating private or semi-public blockchains. Such as the one that the Alastria group wants to set up, or the IBM one, or the one that the R3 consortium set up ".
The increasing appearance of cryptocurrencies and Blockchain in the media and public agenda contributes to the increase in their price
To make a parallel, private or semi-public blockchains come to be like a spreadsheet hosted on Google Drive shared with a permission management: you can decide if anyone sees it but nobody edits it or if only users can access it. those that we have enabled.
That's where ICOs come into play: "Progress will perhaps go this way, due to the advancement of tokens in private blockchains. ICOs are curious and atypical because for the first time in the crowdfunding economy people or companies are allowed propose projects and allow anonymous people to contribute money to make them come true. In exchange, these tokens can be sold in secondary markets difficult for governments to control. "
Another factor that helps the price of bitcoin is precisely its recurring appearance in the media. "More and more media are publishing related content, so more and more people are interested in buying. A non-technical co-worker asked me about it, for example. The more people want to buy, the more money the bitcoin will be worth. That's why I have the feeling that it will continue to rise, perhaps by the end of the year it will be worth a lot more than now.
"In the early days of the Internet, people searched with Lycos and Altavista"
Paco Lodeiro is an investor and founder of Academia de Inversión. From there he teaches investment concepts to anyone interested in making their savings profitable. For him, who has been on the stock market for almost twenty years, Bitcoin is not an attractive investment, quite the opposite. "I advise against investing in Bitcoin not because I think its price is going to fall, but because there is no security. It is an asset that has no intrinsic value. For example, if you invest your money in a stock or a bond, they generate profits. bond coupons, dividends, etc. They generate, for the holder of that asset, future income, cash flows. This type of asset, cryptocurrencies, does not generate any type of future cash flow for the holder. It is impossible to know what they are really worth. "
"Now Bitcoin and Ethereum are imposed, but that does not mean that they are going to be imposed in the long term. When the Internet started, people were looking at Lycos or Altavista ..."
Lodeiro is a technical specialist in finance and investment, not so much in cryptocurrencies or Blockchain. It does not sentence on the future of these, but is limited to remembering the past. "We are living the beginnings of cryptocurrencies. Now Bitcoin and Ethereum are being imposed, but that does not mean that they are going to be imposed in the medium or long term. When the Internet started, people were looking at Lycos or Altavista. Now those are missing. That's what can happen to Bitcoin or Ethereum. "
If you look to the future of cryptocurrencies, it does not sentence, but it warns. "It is a risk that exists, it is something that can happen. Many people invest not to conserve their assets and obtain profitability, but because they want to earn a lot of money in a short time. When at some point it seems that this is no longer possible, many people will go to withdraw the money and there may be major crashes. "
His conclusion is summarized in that he does not know how the value of cryptocurrencies will evolve, but he assumes that they carry too high a risk. What would Lodeiro advise to those who are considering making their savings profitable through an investment? Invest in the stock market. "But with training. Stocks have proven in the long term to be the safest and most profitable asset. If we look at the last two hundred years, stocks have had a real return of 7% per year, on average. Although many investors, for investing without training They lose money by investing in the fad business that is just smoke. You have to learn to select stocks that offer long-term profitability and security. "
The danger of everything exploding
Taking the theory of what could happen according to Lodeiro, could the collapse of Bitcoin come? What would have to happen to cause its value to plummet? For Remo, something like this would be possible especially if the main central banks and governments began to prohibit or penalize transactions with digital assets. "If you are fined 10,000 or 20,000 usd for doing that, you have a very negative incentive to stop the market. And in that case, the price goes down."
Fines for operating with cryptocurrencies and blocking the buying and selling websites would be the main ways to make their value plummet
However, the most common transactions with Bitcoin as an exchange currency occur on the deep web, where it is used to pay for drugs, weapons or other types of prohibited goods in the market. Remo "doubts a lot" that even if the legislation was put at that level it could completely stop Bitcoin. The other way is blocking the legal entry doors to Bitcoin, that is, the exchanges where you can buy and sell them, such as Coinbase, Kraken, BitStamp, etc.
At the beginning of this century we saw in Argentina an inordinate euphoria over the investment in Terra, something that caused the value of its share to skyrocket to unjustifiable values for a company that would only be a web portal prior to a heyday of competitors. Something like what Lodeiro pointed out about "fashion companies". Of course, on that occasion with the support of Telefónica, something that ultimately did not help him much.
Years later, Second Life caused a similar fever: excess of hype and expectations too high when believing that it would become a new Internet that would trap us. In the end it was just a social network that worked for certain uses and then fell into oblivion. Could Bitcoin become something like this? Burgueño does not believe that this could happen, but he does see a fate similar to "the fever of uncontrolled ICOs."
Tulips
Jonathan Tepper
"Tulipomania" was a period of the 17th century marked by the speculative euphoria that developed in the Netherlands around tulip bulbs. Many people began to see them as speculative goods, giving way to an exorbitant rise in their prices that even led to the creation of a futures market. This led to an economic bubble and a financial crisis in which the only ones who got rich were the bulb sellers.
For this article we also wanted to know the opinion of Jonathan Tepper, an economist and investor who, after passing through Lehman Brothers and Bank of America, is today the editor-in-chief of Variant Perception, investment analysts. This is the phrase that he simply answered:
"I don't actually comment on Bitcoin, just like I don't comment on tulips. Some people like them, and who am I to denigrate their beautiful bulbs."
All said. Time will tell us if we are finally facing a new email, a new Altavista or the return of the bulbs four centuries later. With his comment, Tepper has made it clear where he thinks the shots are going, in a similar way to how Lodeiro proposed. Meanwhile, the queen cryptocurrency continues to grow.
