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The Crypto-Bubble – A Speculator’s Dream in Cyberspace

by Pater Tenebrarum, Acting-Man.com:

When writing an article about the recent move in bitcoin, one should probably not begin by preparing the chart images. Chances are one will have to do it all over again. It is a bit like ordering a cup of coffee in Weimar Germany in early November 1923. One had to pay for it right away, as a cup costing one wheelbarrow of Reichsmark may well end up costing two wheelbarrows of Reichsmark half an hour later. These days the question is how many wheelbarrows of US dollars one may need to pay for a bitcoin.

Is it real? (As our readers know, the nature of reality poses certain problems). When we started writing this, bitcoin had just moved up by more than $600 in one week to its then level of $2,400 – within a little more than a day it reached an interim peak of $2,760, then plunged to an interim low of around $1850 in just two trading days, only to rally to a new high of $2,930 over the next two weeks. Currently it trades at $2,750 (don’t hold it against us if these figures are no longer true by the time this post is published).

Naturally, the increasingly parabolic look of the bitcoin chart raises the question whether it represents a bubble, and if so, how large it will become. A good answer to the second part of the question is usually “larger than anyone thinks possible”. As to the first part, it may be fair to say that it has been in a bubble since shortly after its birth. At one point in 2009 the currency could be bought for 1/100 of 1 US cent (USD 0,0001). It rallied to 5 cents by 2010, which is quite a big move. We dimly remember a story about a pizza restaurant selling Margheritas for BTC 20,000 apiece at the time. In 2011 it reached a peak of $18.50 – and so on, and so forth.

In recent weeks we occasionally watched in mute fascination as bitcoin fluctuated in ranges of several hundred dollars in the space of a few hours. On May 22 it had a little dip just below the $2,000 mark to give everyone a good entry point. But would it really be worth it? What if the bubble was about to collapse? Three days later the courageous dip buyers were up by almost 40%. Given how overbought bitcoin looks, one would have thought it a good idea to take the money and run, but of course we have no idea how crazy things will still get before everybody really starts dialing 1-800-GETMEOUT.

Read More @ Acting-Man.com

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