Are Bitcoin, Ethereum, Other Cryptocurrencies a Bubble? [A Slightly Biased & Data Driven Dive]

Recently, many skeptics of cryptocurrencies have began to view Bitcoin and other altcoins as a serious investment.

However, some critics are still warning people against digital currency, calling Bitcoin “the most dangerous global scam in 20 years.”

They believe that cryptocurrencies aren’t worth all the hype.

They think that the price of Bitcoin is going to crash hard…and that when it does, investors who backed it will have already cashed out safely.

This belief stems largely from the fact that Bitcoin isn’t directly backed by any kind of government or bank.

But does that mean that Bitcoin and other cryptocurrencies are an unsafe investment? Or is decentralization what makes cryptocurrency so great?

Are Bitcoin, Ethereum, and other Cryptocurrencies just a bubble waiting to burst?

In this article, we’re going to find out.

A New Class of Cryptocurrencies

If you’re a cryptocurrency newbie, you probably have some misconceptions about Bitcoin and other altcoins.

Though Bitcoin is the largest cryptocurrency around, it’s not the biggest growth driver of the digital currency world anymore.

According to Coinmarketcap, all cryptocurrencies are worth a combined total of $442 billion. Bitcoin makes up less than half of that with a $170 billion market cap.

In comparison, Ethereum is worth $82 billion, while Ripple is worth $36 billion.

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A few years ago, one Bitcoin was worth just a bit more than one hundred dollars. Now, one bitcoin is worth over $10,000.

It’s still considered the most reliable coin when it comes to acting as both a payment platform and a digital currency. However, the new kinds of digital coins are different animals altogether.

Ethereum, for example, is a modern digital coin that is following in Bitcoin’s footsteps.

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But Bitcoin is arguably the largest “bubble” that’s ever existed. Here’s why.

Bitcoin = The Largest “Bubble” We’ve Ever Seen

Bitcoin is officially the largest bubble that the world has ever seen, according to Convoy Investments.

Just look at how it stacks up against the other famous bubbles in history, like Great Depression Stocks (1923-1932) or Financial Crisis Stocks (2006-2009).


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The rise in prices have been so sudden and huge that even Bitcoin insiders are warning people of the potential risks of investing.

Brian Armstrong, the founder of the popular cryptocurrency exchange, Coinbase, has expressed that Bitcoin prices can be volatile. He urged people to “invest responsibly” in a blog post.

Recently, the founder of Ethereum warned that cryptocurrencies could “drop to near zero at any time.”

These concerns and warnings aren’t necessarily untrue.

Cryptocurrency markets offer less protections to investors than traditional markets, because they’re decentralized.

That’s where the risk comes in. But that’s also what has made cryptocurrencies like Bitcoin so popular: people love the lack of government regulation.

Though Bitcoin prices can seem volatile, it isn’t as unstable as many people may think.

Bitcoin May Seem Volatile, But It Isn’t That Unstable

At the beginning of 2017, one Bitcoin cost $1,000. The value of one Bitcoin is now more than ten times higher.

However, prices tend to fluctuate often. In early February, the price of Bitcoin had dropped below $8,000 for the third time in four days.

Altcoins also fluctuate. Usually, prices of altcoins fluctuate even more than Bitcoin.

But the Bitcoin market is actually the most stable market of all digital currency.

And it’s no more volatile than the daily percent price change of oil. Even Twitter stocks are more volatile than Bitcoin.

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That being said, you should never invest more in any cryptocurrency than you’re willing to lose. But the same mentality should be applied to all investments.

And there’s a big difference between “regular” investments and cryptocurrency investments.

When you invest in Bitcoin, you’re not just investing in a company or an idea. You’re investing in the value of digital money.

The True Value of Digital Money

When the price of a particular stock goes up, there’s usually some kind of reason that attributes to the price rising.

When big brands have a good quarter, their stock price generally drives up. When they experience a bad quarter, it drops.

But there’s less to go off of when it comes to Bitcoin or any other kind of digital currency. Most people just go off of Bitcoin news.

Recent Bitcoin news hasn’t been so great.

Back in 2017, the U.S. Securities and Exchange Commission declined a bid to get the Winklevoss brothers’ Bitcoin ETF listed on the Bats BZX exchange.

This would have made it much easier for any average investor to make speculations and predictions about where the future of Bitcoin is headed.

To add fuel to the fire, those involved in the Bitcoin community have been debating about whether or not the size of blocks within the coin’s blockchain should be increased.

Blockchains are the technology used to perform transactions with Bitcoin. They’re also the main reason that people see value in cryptocurrencies like Bitcoin.

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Blockchains provide investors with security and peace of mind. Big banks are even catching on to their benefits (and people’s love for them).

Inflation could change the game, though. Here’s why.

Inflation Could Change It All

Bitcoin’s rise to fame is partially a product of people’s aggressive attitudes toward global central banks.

These attitudes have been caused by The Great Recession and the recent collapse of the Lehman Brothers, Washington Mutual, and more.

The value of the U.S. dollar has inflated by 43.94% just since the year 2000.

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Inflation isn’t a big issue for cryptocurrency investors. Many tend to invest in digital coins to escape the turbulent economy of the United States.

Only 21 million Bitcoin will ever be mined, and the “peer-to-peer” nature of the decentralized market means that Wall Street and central banks can’t control the prices.

But moderate inflation can be good for the economy. And the U.S. dollar seems to be on the rise.

The Federal Reserve has been tightening their policies down for a few years, and inflation has been picking up to ease the market.

If the U.S. dollar rebounds in a huge way soon, the entire premise of Bitcoin could be undermined.

With a secure official currency, many people won’t need to look toward an alternative form of money like Bitcoin or Ethereum as a means of additional financial security.

That being said, central banks fail. And they fail often. Decentralized systems are historically more stable.

Decentralized Systems Remain Stable When Central Banks Fail

There’s no one at the head of the table when it comes to decentralized systems. Everyone within the system has the same shot and opportunities.

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Centralized systems work in the opposite way. Control and power rest in the hands of the centralized powers.

That’s why Bitcoin was invented: to resist the control of those powers.

The creator(s) of Bitcoin, known as Satoshi Nakamoto, has chosen to remain anonymous for that very reason.

As the coin rises in value, it’s known that the creator(s) control at least one million coins that have never been removed from the original wallets on which they were placed.

If Bitcoin were to ever reach $100,000 per coin like some have predicted, that would make the coins worth $100 billion.

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But even decentralization or triple-entry accounting aren’t where the true value of Bitcoin lies. These are just the perks of the system and the way that it works.

The main power than cryptocurrencies have over centralized currencies is that cryptocurrencies can be distributed without any kind of “owner.”

The owner of the money goes back to those that it serves: the people.

But the cryptocurrency that will change everything and create a new global currency might not exist yet.

Now, instead of central bankers, un-elected miners are influencing the market.

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Miners can control the system in one way or another by holding back software upgrades or attempting to drive down prices so that they can purchase more when they’re cheap.

For this reason, Bitcoin isn’t a bubble. It’s just a form of new money. It isn’t the exact same as regular fiat currency, but some of the same challenges are still present.

New Money, Not a Bubble

It’s no secret that regular fiat currencies crash. Regularly.

Here are just a few examples of fiat currencies that have crashed in the past:

  • Rome – 213 AD
  • Germany – 1923
  • Argentina – 1932
  • China – 11th century
  • France – 1795
  • Mexico – 1994
  • Thai “baht” – 1997
  • Many more

Cryptocurrencies create brand new money. They can do things that the U.S. dollar or gold just can’t do, like allow people to remain anonymous or provide non-counterfeitable funds.

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Unlike credit markets that don’t actually expand the money supply by lending out funds that aren’t there, cryptocurrencies literally create brand new funds that immediately have value.

This is a stark contrast to more U.S. dollars being printed to go out in circulation. The more money that’s printed, the less each dollar is worth.

With cryptocurrency, every coin mined holds its value because every mined coin is created by maintaining and updating the blockchain.

That just isn’t possible with regular fiat currency and fractional reserve lending.


Many critics are harsh on cryptocurrencies like Bitcoin or Ethereum.

They think that it isn’t worth the hype, that prices are going to crash hard, and that crypto is a bubble that’s going to burst because it isn’t backed by a central bank.

But that’s actually what makes these coins so valuable.

Many skeptics have recently been turned into believers in cryptocurrencies as a serious form of investment.

Cryptocurrencies like Bitcoin and Ethereum aren’t a bubble. They’re a new class of money.

Bitcoin is the largest “bubble” we’ve ever seen. Nothing in history has ever been worth so much money in such a short amount of time.

It can seem like a volatile market, but it’s no more volatile than the price of oil. And the true value of digital money lies in the fact that it’s decentralized and backed by the blockchain.

Inflation could make cryptocurrency less valuable, since many people invest in it to avoid the uncertainties of fiat currencies.

If fiat currency becomes more stable, some people may not see as big of a need to try and secure their funds in cryptocurrencies.

Nonetheless, decentralized systems remain stable when central banks and fiat currencies fail.

The bottom line is that cryptocurrencies aren’t a bubble: they’re a form of new money that can be created while simultaneously adding value to the digital currency system.

And they can provide security that gold or the U.S. dollar just can’t provide.

If you’re skeptical of investing in Bitcoin, Ethereum, and other cryptocurrencies because you think they’re just a bubble, don’t let the skepticism and critics hold you back.

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