Anorak | If Bitcoin walks like a Bubble and quacks like a bubble then why isn’t Bitcoin A Bubble?

If Bitcoin walks like a Bubble and quacks like a bubble then why isn’t Bitcoin A Bubble?

by | 10th, April 2013


THE Telegraph managegs to get itself slightly confused this morning:

Bitcoin passes $200 mark for the first time
Bitcoin, the controversial electronic currency, has passed the $200-mark for the first time, setting new records despite talk of a bubble.

This is not despite talk of a bubble. It is the very fact that Bitcoin has just passed $200 which leads to the talk of a bubble.

There seems to be some assumption being made that if Bitcoin is a bubble then therefore it’s not real, or not really going to change the world. Thus those who like Bitcoin must keep saying that it isn’t a bubble and those who don’t must keep saying it is. But that isn’t how these things work.

It is indeed possible that Bitcoin will change the world. I think it’s most unlikely but I’m happy to accept that it is vaguely, in some indeterminate manner, possible.

But whether it will or not is entirely separate from whether it is a bubble at present.

Try this with something else: tulips. We all know about tulip mania, how the prices of tulips went absolutely wild in Amsterdam over a year or two. One bulb worth more than a house at one point. Then the value collapsed and all saw that it really was a financial bubble.

However, tulips really did change the world as well. Before that bubble they were rare in Europe. Today the Dutch still grow vast fields of them for the rest of us to enjoy, either as cut flowers or as bulbs to implant into our own gardens. Tulips are, still, a multinational industry. One far larger than they were at the time of said tulipmania.

Tulips did indeed change the world just as Bitcoin might. But that’s got nothing at all to do with whether the prices of tulips were a bubble (they were) or Bitcoin prices today are a bubble (I think so). The two are simply entirely different questions.

Posted: 10th, April 2013 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink