The Cryptocurrency Bubble: Reality or Reactionary?
21st December, 2017
Bitcoin has had a wild ride this year, to say the least. So it’s no surprise to hear talk of a cryptocurrency bubble. That’s to be expected when society is on the precipice of a major change to the established order. There are vested interests and mechanisms of control at stake. The recent crackdown on cryptocurrencies by Bulgarian banks comes to mind.
Naval Ravikant, Co-Founder of AngelList, sees the future of cryptocurrency differently. He believes that Bitcoin and other cryptocurrencies have the potential to solve the money problems of many different people around the world. And that in general, people everywhere are looking for alternatives. In his presentation at the Token Summit II in San Francisco, California earlier this month, he pointed to this brewing demand as a key driver of Bitcoin’s astonishing performance in 2017.
Ravikant also made the case that fears of a cryptocurrency bubble are unfounded. Drawing a comparison between Bitcoin and fiat currencies, he said “Money is a bubble that never pops. It’s a consensus hallucination.” In other words, cryptocurrencies are no more likely than fiat currencies to bottom out. Both are kept afloat by people agreeing to believe in them and trade in them.
Making the point that not all cryptocurrencies are created equal, Ravikant said that many are being traded at very high values that don’t deserve it. He didn’t name any names. “One indicator we are in a very frothy environment is we have a lot of tokens trading at very high values that are junk. Right now, I think the market isn’t distinguishing quality.” Indeed, it is important to be discerning, rather than giving into the temptation of chasing the next big coin.
Back in May of this year, one conservative publication in the U.S. warned, “This is the end.” This was in reaction to the Bitcoin price reaching $2,700 and to the rise of other cryptocurrencies. We all know what happened in the months that followed. As of this writing, a single Bitcoin is worth more than $15,000.