The first financial bubble ever recorded took place in the Netherlads.
People sold their houses, personal assets and even risked money that they didn’t have, or need, to merely own a tulip.
The positive feelings, and emotions around the value of tulips, had fueled this mania.
Without even measuring the underlying value of the asset, it led to a positive feedback. Everyone is buying and bidding up the prices of tulips, by increasing the demand. Without any fundamental basis.
Over a course of one week, the prices of the tulips plummeted to become worthless. People relying heavily on them went bankrupt.
Does this ring a bell?
Let me help you figure it out.
I have been strongly against “investing” in Bitcoin. If one can not measure the value of an asset, hence it isn’t called an investment.
For me it’s a pure gamble, even if you think that you know, that there is a hidden potetnial for those cryptocurrencies.
If you can’t measure the value of it (Bitcoin, for example), how can you know when to buy? hold? or sell the asset?.
Now everyone will come and shout: “But look it went up! And it’s still going higher!”.
Well you are right, and it might have more room to run.
But that doesn’t make any difference. You can’t know the value of it. In the meantime the prices are going higher. Why? because people think that it should be higher. Or even worse, they just want to make a quick buck, as their friend or neighbor just did.
Unlike Jamie Dimon I’m not saying that Bitcoin is a fraud, or may not last. All i’m saying is, that it is not an investment. On the contrary it’s a pure gamble (which turns out to be paying off until now), as i said in my previous articles, if you have some extra money or you really want to have some part of this action which involves huge price swings that is usually accompanied with drama, then buy it.
As I said before I‘m hopefull that I‘m wrong about this, and the Bitcoin isn’t in a bubble because many people will lose a lot of money, or everything they own.
Disclaimer: As of today 09.12.17 i don’t own any Bitcoins or any other cryptocurrency.