The rise of cryptocurrency such as Bitcoin and Ether has left many wondering: is this all just a Ponzi scheme? Or is it a form of euphoria? Is it like the dot-com bubble in 1999, or the housing bubble in 2007? Let’s take a closer look at the various ways to explain this phenomenon. And what is a crypto bubble? What exactly is a crypto bubble, and why does it matter to investors?
Bitcoin is a form of gambling
The Bitcoin price is a form of speculative gambling, and as such, it falls under the definition of gambling. It involves the possibility of financial gain or loss, and there is no governing body to determine whether or not the investment will generate a profit. The price fluctuations of Bitcoin are based on the theory of the greater fool, and new players redeem older players. Because of this, many governments have taken steps to regulate the cryptocurrency market, and some countries have banned it altogether.
Ethereum is a form of euphoria
The recent price surge in cryptocurrencies such as Bitcoin and Ethereum has fueled a sensational narrative of average people striking it rich. Stories abound: a teenager from Idaho made a million-dollar investment in Bitcoin, a Forbes article featured a man who travelled the world on 25 million dollars in bitcoin profits, and the Telegraph has a story about a high school student who became a millionaire through cryptocurrency.
Bitcoin is a Ponzi scheme
While some people assert that Bitcoin is a Ponzi scheme, they fail to consider what a Ponzi scheme actually is. This monetary system relies on an ever-growing pool of investors to make profits. In other words, a Ponzi scheme must be based on fraud. However, in Bitcoin’s case, the underlying reason is not a Ponzi scheme. Rather, it’s a collective delusion.
Ether is a form of euphoria
When the market is surging, there is an air of euphoria and excitement. The newfound opportunities for investment are creating a new class of investors. While many of these newcomers will be young and tech-savvy, the larger institutions may be a bit more cautious and wait until a bubble has passed before they enter. They may have previously avoided cryptocurrencies due to their volatility or difficulty in acquiring them.
Bitcoin is a form of displacement
A cryptocurrency is a new concept, which is why it experiences disruption and attracts investors. Bitcoin was a new concept in 2009, and mainstream media helped to create the hype. This fueled the price, which ultimately went up. Speculators began to pour into the new asset, and this drove its price higher. At its peak, the price reached an all-time high. This is known as the euphoria stage, when investors are desperate to buy it.
Bitcoin is a form of euphoria
In the cryptocurrency world, euphoria is a state of extreme happiness and well-being. As Sir John Templeton famously put it, “bull markets are born on pessimism, mature on optimism, and die on euphoria.” Indeed, euphoria often precedes mania, a form of hyperbolic overconfidence that is more extreme and erratic.
Ether is a form of profit-taking
Ethereum (ETH) is a digital currency that exists solely online. It has soared to record levels this year, making it the second-most valuable cryptocurrency behind bitcoin. The hype around crypto has led to a mixed response: some hail it as the next payment system, while others see it as nothing more than a speculative bubble. However, the latter group seems to be gaining ground.