Bitcoin now the largest quantifiable bubble in history?

[tadamsmar]

See the November 30 plots here:

https://www.cnbc.com/2017/11/30/bitcoin ... -time.html

Given the bitcoin run-up since Nov 30, I'd say it's now bigger than the Mississippi Company bubble by the measure used in that link.

Note that the information to quantify the Tulip Bubble is apparently not available.

This indicates that the bitcoin bubble exceeds the Tulip Bubble:

https://www.cnbc.com/2017/07/20/bitcoin ... -wave.html

[Wakefield1]

"How high can it go?" asks the newspaper article:
Is the answer "as high as buyers are willing to pay"?

[Thesaints]

Are rare stamps a bubble too ?

[tadamsmar]

The price dropped +10% and started fluctuating a few hours ago after it hit $16500.

[nisiprius]

The price dropped +10% and started fluctuating a few hours ago after it hit $16500.

Accumulator overflow at 16,383?

[bberris]

"How high can it go?" asks the newspaper article:
Is the answer "as high as buyers are willing to pay"?

[alfaspider]

Are rare stamps a bubble too ?

As far as I know, rare stamps have not appreciated several thousand fold over the last decade.

[Tamalak]

That something appreciates quickly does not classify it as 'a bubble'.

Bitcoin is a bubble if its rational value is much less than its market value. So, is it?

[Thesaints]

Still their value is only dependent on what their collector are willing to pay. Differently from more traditional financial assets, nobody really "needs" stamps, which is also true for BTC.

[tadamsmar]

What does "rational value" mean?

[Thesaints]

What does "rational value" mean?

Something like "rational" in "rational market"

[brad.clarkston]

That something appreciates quickly does not classify it as 'a bubble'.

Bitcoin is a bubble if its rational value is much less than its market value. So, is it?

There would have to be a "market value" for it first. It's just a high value trinket.

The problem isn't with a traditional bubble it's with the horrible wallet code and attack vectors.
That is what will cripple cryptocurrancy.

[tadamsmar]

My rational argument is that Bitcoin has value as a medium of exchange to circumvent the law, mainly. The price run-up is not justified on that basis.

[rkhusky]

Isn't it only a bubble if it pops?

[aristotelian]

I can't tell from the article what that even means. Largest % run up over X period of time? Largest by market cap? Absolute or nominal dollars?

I did hear on NPR I think that Bitcoin market cap is equivalent to a top 20 S&P 500 company. That would make it equivalent to companies such as AT&T, Visa, and Intel, which are about 1% of the S&P each. If it goes to zero it will definitely cause some pain.

I have to admit to feeling caught up in this thing. Very hard to resist putting 0.5% of my portfolio in it to see what happens.

[Blueskies123]

Isn't it only a bubble if it pops?

No, that would be an UN-popped bubble. Like in 2000 and 2008, then one year later.

[Blueskies123]

My rational argument is that Bitcoin has value as a medium of exchange to circumvent the law, mainly. The price run-up is not justified on that basis.

Originally that was the case but then day traders and speculators (and a few very smart people), jumped on the train.

[quantAndHold]

That something appreciates quickly does not classify it as 'a bubble'.

Bitcoin is a bubble if its rational value is much less than its market value. So, is it?

In another one of the many bitcoin threads on bogleheads right now, someone said his teenage kid was asking if he could buy bitcoin. I suspect that the bubble will be popping soon. If teenagers are buying, then anyone who wants bitcoin already has it.

[rkhusky]

Isn't it only a bubble if it pops?

No, that would be an UN-popped bubble. Like in 2000 and 2008, then one year later.

What happens if bitcoin never drops in price, but stabilizes at the current price for the next 50 years? Was it still a bubble?

[HomerJ]

Isn't it only a bubble if it pops?

No, that would be an UN-popped bubble. Like in 2000 and 2008, then one year later.

What happens if bitcoin never drops in price, but stabilizes at the current price for the next 50 years? Was it still a bubble?

Then it's not a bubble.

[Thesaints]

What happens if bitcoin never drops in price, but stabilizes at the current price for the next 50 years? Was it still a bubble?

Exactamundo!

Then it's not a bubble.

Is "bubble" only short for "deflated bubble" ?

[tadamsmar]

I can't tell from the article what that even means. Largest % run up over X period of time? Largest by market cap? Absolute or nominal dollars?

I did hear on NPR I think that Bitcoin market cap is equivalent to a top 20 S&P 500 company. That would make it equivalent to companies such as AT&T, Visa, and Intel, which are about 1% of the S&P each. If it goes to zero it will definitely cause some pain.

I have to admit to feeling caught up in this thing. Very hard to resist putting 0.5% of my portfolio in it to see what happens.

Looks like percent since 1/1/2016.

[tadamsmar]

Isn't it only a bubble if it pops?

It might not be a bubble even if it pops. Malkiel maintains that the internet bubble was rational because it could have been justified by spawning a single Microsoft-like growth firm. The rational argument has to pop, not just the bubble.

[Tyler Aspect]

In another one of the many bitcoin threads on bogleheads right now, someone said his teenage kid was asking if he could buy bitcoin. I suspect that the bubble will be popping soon. If teenagers are buying, then anyone who wants bitcoin already has it.

I would say when grandmas or grandpas start buying bitcoins, then the crash is not far away.

[David Jay]

In another one of the many bitcoin threads on bogleheads right now, someone said his teenage kid was asking if he could buy bitcoin. I suspect that the bubble will be popping soon. If teenagers are buying, then anyone who wants bitcoin already has it.

I would say when grandmas or grandpas start buying bitcoins, then the crash is not far away.

I resemble that remark!

[fatlever]

I would say when grandmas or grandpas start buying bitcoins, then the crash is not far away.

Grandma is one step ahead of Bogleheads

https://www.wsj.com/articles/bitcoin-ma ... 1511996653

[Valuethinker]

In another one of the many bitcoin threads on bogleheads right now, someone said his teenage kid was asking if he could buy bitcoin. I suspect that the bubble will be popping soon. If teenagers are buying, then anyone who wants bitcoin already has it.

I would say when grandmas or grandpas start buying bitcoins, then the crash is not far away.

Or perhaps for many of us, we have a quantum reality problem at work?

If my grandparents start buying bitcoins, then a putative bitcoin bubble is perhaps the least of our worries.

My grandfather was a prisoner of the Bolsheviks in Russia, in 1919 - I should like to ask him about the experience.

[tadamsmar]

It's back at it's high. It's recovered from the 10% correction of a few hours ago!

[Thesaints]

The Bolsheviks will be happy

[jadd806]

With the release of Bitcoin futures literal days away (December 10th), I wonder how coincidental this run up really is?

Short the futures, dump a large pile of Bitcoin on several exchanges... Given the market cap of "only" $300B with $20B/day volume, it really wouldn't be that hard to manipulate the Bitcoin market.

Not to mention Tether (USDT) being "printed" by the cryptocurrency exchanges and supposedly being used to inflate the price of Bitcoin. Tether is a cryptocurrency which claims to be pegged to the US Dollar, i.e. 1 USD = 1 USDT. However, many users suspect that Tether does not actually own nearly enough assets to back the value of USDT, and that the true value of this peg is likely pennies on the dollar. The timing of the Tether "printing" is highly convenient, usually occurring whenever there is a small pullback in the price of Bitcoin.

Here is a more in depth read on Reddit:

https://www.reddit.com/r/Buttcoin/comme ... of_tether/

[telemark]

I was looking for a way to determine the correct value of Bitcoin that would be more rigorous than current methods. So I decided to flip a coin: heads would mean the current price is too high, tails would mean too low, if it landed on its edge that would mean the price is exactly right. But the coin got away from me, rolled away, and disappeared down a sewer grate

[Thesaints]

But the coin got away from me, rolled away, and disappeared down a sewer grate

See ? Yet another advantage of cryptocurrencies. That would never happen with BTC, unless you lose your USB stick.

[lazydavid]

But the coin got away from me, rolled away, and disappeared down a sewer grate

Did it float? We all float down here....

[TheTimeLord]

See the November 30 plots here:

https://www.cnbc.com/2017/11/30/bitcoin ... -time.html

Given the bitcoin run-up since Nov 30, I'd say it's now bigger than the Mississippi Company bubble by the measure used in that link.

Note that the information to quantify the Tulip Bubble is apparently not available.

This indicates that the bitcoin bubble exceeds the Tulip Bubble:

https://www.cnbc.com/2017/07/20/bitcoin ... -wave.html

Bitcoin is likely a bubble but how can you say it is a bubble until it pops?

[Epsilon Delta]

The Bolsheviks will be happy

Can you buy rope with Bitcoins?

[am]

Seems irrational to me. A code generated coin without intrinsic value, that has little practical use, and is a regulation away from dropping drastically. I have a hard time holding something that I think has no value for the long term.

On the other hand, I do have some feelings of fear of missing out on the next big thing as I watch it rise like crazy. I keep reminding myself that I will reach my goals without bitcoin and that the gains from bitcoin would not change anything other than add complexity, produce stress, and go against my beliefs.

[peterinjapan]

I bought "a little" ($2000 of BTC, $5000 of ETH plus a small chunk of the GBTC trust). Mainly so I can enjoy the ride, which is what investing is about for me, after my net worth got more than $3 mil. Also my son is doing it with me, so we're both learning about it together. There are a lot of "greater fools" out there still.

[peterinjapan]

There are some use cases. People in Europe are working and sending money home via BTC to their families. I bought some meds I want to keep private using BTC just because it seemed like a fun thing to do in 2017.

Seems irrational to me. A code generated coin without intrinsic value, that has little practical use, and is a regulation away from dropping drastically. I have a hard time holding something that I think has no value for the long term.

[Momus]

I don't believe everyone has it. US has low interest in bitcoin. Check Google trends and type in bitcoin. We are like number 10-15th country that search "bitcoin" in Google. This can go up 4x more once US mom and pop started buying. All the trades are basically FOMO trades. It's gonna be the greatest bubble in history when it pops.

[alwayshedge]

The fact that everyone is calling it a bubble makes me suspect it's not a bubble.

[Mingus]

The Bolsheviks will be happy

What do you mean? Isn't bitcoin the opposite of central control?

[WanderingDoc]

That something appreciates quickly does not classify it as 'a bubble'.

Bitcoin is a bubble if its rational value is much less than its market value. So, is it?

In another one of the many bitcoin threads on bogleheads right now, someone said his teenage kid was asking if he could buy bitcoin. I suspect that the bubble will be popping soon. If teenagers are buying, then anyone who wants bitcoin already has it.

Thats where you're wrong. Teenagers were some of the FIRST to buy in, as evident from the Bitcointalk.org forum and YouTube comments going back about a year. Its us adult folks like myself, who only bought in a month ago.

I have to admit, this price run up has left me pretty manic. Excited, anxious, and exhilarated at the same time. Hard to sleep, not that I've needed it.

[willthrill81]

See the November 30 plots here:

https://www.cnbc.com/2017/11/30/bitcoin ... -time.html

Given the bitcoin run-up since Nov 30, I'd say it's now bigger than the Mississippi Company bubble by the measure used in that link.

Note that the information to quantify the Tulip Bubble is apparently not available.

This indicates that the bitcoin bubble exceeds the Tulip Bubble:

https://www.cnbc.com/2017/07/20/bitcoin ... -wave.html

Here was my response to a similar question in another thread.

Though I'm neither a Bitcoin skeptic nor a true believer (I don't have any invested in it, though I seriously considered buying some at $600 ), I think that the only intellectually honest position regarding Bitcoin, cryptocurrency in general, and the future at large is that we know nothing with certainty. Even in the presence of historical evidence, there are no guarantees of future performance as many are very quick to point out on this forum. When it comes to discussing factor investing or backtested portfolios, people are quick to say "Nobody knows nothing," but when it comes to Bitcoin, they act as though they know that the outcome will be disastrous, despite the market obviously disagreeing with them. This makes me really question how many here truly believe in the efficient market hypothesis; I for one do not, at least not the 'strong version'.

Generally speaking, I think it's safe to say that Bogleheads are a fiscally conservative bunch and not early adopters of new technology. Bitcoin and cryptocurrency in general is a very new idea using very new technology and is not very easy to completely understand. Taken together, the rampant skepticism of Bitcoin on this forum is to be expected.

As long as owners of Bitcoin have confidence in the currency, it will not 'fail'; if that confidence is lost, then the currency will fail. This is true of any currency out there and also true of the financial markets in general. If confidence is there, all is well. If that confidence is lost, the herds move for the exits very quickly.

[randomizer]

The fact that everyone is calling it a bubble makes me suspect it's not a bubble.

The rise over the last month sure looks a lot like a speculative frenzy. Expecting the bubble has got to pop soon.

[technovelist]

Though I'm neither a Bitcoin skeptic nor a true believer (I don't have any invested in it, though I seriously considered buying some at $600 ), I think that the only intellectually honest position regarding Bitcoin, cryptocurrency in general, and the future at large is that we know nothing with certainty. Even in the presence of historical evidence, there are no guarantees of future performance as many are very quick to point out on this forum. When it comes to discussing factor investing or backtested portfolios, people are quick to say "Nobody knows nothing," but when it comes to Bitcoin, they act as though they know that the outcome will be disastrous, despite the market obviously disagreeing with them. This makes me really question how many here truly believe in the efficient market hypothesis; I for one do not, at least not the 'strong version'.

Generally speaking, I think it's safe to say that Bogleheads are a fiscally conservative bunch and not early adopters of new technology. Bitcoin and cryptocurrency in general is a very new idea using very new technology and is not very easy to completely understand. Taken together, the rampant skepticism of Bitcoin on this forum is to be expected.

As long as owners of Bitcoin have confidence in the currency, it will not 'fail'; if that confidence is lost, then the currency will fail. This is true of any currency out there and also true of the financial markets in general. If confidence is there, all is well. If that confidence is lost, the herds move for the exits very quickly.

I agree with most of this, but the strong version of the efficient market hypothesis cannot be correct. For if it were, it would be impossible ever to identify a bubble while it was in progress.

This is clearly incorrect because quite a few people identified the NASDAQ dotcom bubble while it was in progress.

[TomCat96]

Somewhere back I read that evidence seems to support the semi-strong form as the most reflective of current stock markets.
It's definitely not strong form.

at any rate, is bitcoin now the largest quantifiable bubble in history?
I don't think that's even close to remotely true, either in real or nominal form.

You had a bigger bubble in 2008, resulting from the global real estate bubble, with mortgages that were securitized, tranched, and sold the world over into pension funds, money markets, and bank portfolios, creating a massive systemic risk. Even in nominal terms, that something at least ten times the size of bitcoin today, considering it was a global real estate bubble. Yes Im saying the bubble in global real estate exceeded 2.7T nominal. Today in nominal it would be far more. (I dont particular like either the CPI or PCE. I think inflation is considerably higher if you look at the monetary expansion...but I digress)

If you want to consider things in real terms, which is the real question we ought to be asking, bitcoin is just too small considering it is a single asset class with exposure distributed globally, with few systemic ties to the actual global financial system.

To be frank Oil in 2013 was probably a bigger bubble than bitcoin is today. I will say one thing. For an asset of its size, bitcoin truly commands a disproportionate amount of attention and media. This forum is one example. Of course all these numbers may change in the future, but I just don't see it yet.

[Valuethinker]

Somewhere back I read that evidence seems to support the semi-strong form as the most reflective of current stock markets.
It's definitely not strong form.

Most people would agree that with inside information, you can outperform.

However liquidity works against you. If the other side of the trade thinks you have superior information, they may not trade.

at any rate, is bitcoin now the largest quantifiable bubble in history?
I don't think that's even close to remotely true, either in real or nominal form.

Measured simply by price movement over time.

You had a bigger bubble in 2008, resulting from the global real estate bubble, with mortgages that were securitized, tranched, and sold the world over into pension funds, money markets, and bank portfolios, creating a massive systemic risk. Even in nominal terms, that something at least ten times the size of bitcoin today, considering it was a global real estate bubble. Yes Im saying the bubble in global real estate exceeded 2.7T nominal. Today in nominal it would be far more. (I dont particular like either the CPI or PCE. I think inflation is considerably higher if you look at the monetary expansion...but I digress)

Remember GDP = quantity of money x velocity

Simple quantitative theory of money does not work because the financial system creates new types of money all the time. That was the problem with the experiment in Monetarism at the beginning of the 1980s (of which the UK was front and centre, along with Chile; much "purer" form than the Fed ever dared to try).

If you want to consider things in real terms, which is the real question we ought to be asking, bitcoin is just too small considering it is a single asset class with exposure distributed globally, with few systemic ties to the actual global financial system.

Over this short a period of time the real and the nominal will be almost identical in USD terms. Or EUR terms. etc.

To be frank Oil in 2013 was probably a bigger bubble than bitcoin is today. I will say one thing. For an asset of its size, bitcoin truly commands a disproportionate amount of attention and media. This forum is one example. Of course all these numbers may change in the future, but I just don't see it yet.

By value, yes. But oil only dropped 60%. And has rebounded 50% so 40% down in total (as of this moment).

[rkhusky]

Is Salvator Mundi at $450M in a bubble?

[Tallis]

Is Salvator Mundi at $450M in a bubble?

One painting can't be a bubble. What is the market in Old Masters paintings doing in general?

[zeugmite]

In another one of the many bitcoin threads on bogleheads right now, someone said his teenage kid was asking if he could buy bitcoin. I suspect that the bubble will be popping soon. If teenagers are buying, then anyone who wants bitcoin already has it.

I would say when grandmas or grandpas start buying bitcoins, then the crash is not far away.

Counterpoint: Coinbase becomes #1 app on app stores, rappers and pro sports retirees shilling for ICO's, yeah, I think it's a bubble.

As far as largest quantifiable, that would depend on volume. It's hard to say but price alone doesn't justify that moniker. It does appear to be the first bubble where participation is this easy, due to the the current state of digital devices and electronic banking. I mean you can do it on your phone on your way to work and watch it 24/7.