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Forget Tulips: Bitcoin Is The Biggest Bubble In History

Forget Tulips: Bitcoin Is The Biggest Bubble In History

In a month, Bitcoin has dropped 50% from a high of nearly $20,000 in mid-December down to just over $10,000 this week. According to CoinDesk, it now sits around $11,000.

By the end of 2017, Bitcoin had shot up 20 times its value since the beginning of 2017. Just like other cryptocurrencies, Bitcoin is notoriously volatile, but it’s most recent wobbles have many wondering if the largest cryptocurrency by market cap will go down as one of history’s most infamous bubbles.

The magnitude of Bitcoin’s boom before it lost 50% from its December 18th high, suggests investors may want to be worried. Bitcoin’s bubble isn’t like tulipmania. It is much bigger.

Source: Bloomberg.

This jaw-dropping chart from Bloomberg shows that Bitcoin’s nearly 60-fold increase in the past three years has truly been extraordinary, dwarfing the Nasdaq’s gain during the dotcom bubble.

It also outgunned the Mississippi and South Sea bubbles of the 1700s. It even soared above the Dutch tulipmania of the 1630s.

Bitcoin’s boom may be far from over, bulls say. They’ll also say there’s more to analyzing a market than just measuring price gains. Bitcoin has survived 50% drops before, and if it did become a widely-accepted form of digital currency, it could have much further to climb.

On an annualized basis, Bitcoin’s rise over the last 3 yard has been slower than the gains seen by many of history’s biggest bubbles, especially compared to the Mississippi and South Sea bubbles.

But Bitcoin still has its skeptics. Howard Wang of Convoy Investments LLC and Jeremy Grantham of GMO LLC have both analyzed Bitcoin’s rise relative to past bubbles and have concluded that it is unstable. Grantham wrote in a recent letter to investors:

“Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble.”

Bitcoin has, of course, had other vocal critics, including JPMorgan CEO Jamie Dimon who called Bitcoin a fraud last fall. Recently though, Dimon has backpedaled on his earlier criticisms. Last week, Dimon told Fox Business that “I regret making” that comment, and “The blockchain is real.”

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