There had a rough debate whether the Bitcoin price was a bubble and a team of researchers from Bank of America Merril Lynch had recently published a note where they compare the biggest bubbles in the recorded history. Although there are many similarities, you will find in the next rows that Bitcoin is special, since the price had a different evolution after the bubble burst.
The Bitcoin bubble-the biggest in history
According to the research, the Bitcoin price rose 60 times in three years, which is greater than the tulip bubble, where the numbers were around 40. The research used other bubbles as well: the price of gold, 1929 crash, Mississippi Company and South Sea Company.
The Bitcoin price stands out in a huge way. Now some of you might ask if Bitcoin could rally in the second half of 2018. Let’s discuss how the price behaved in the last few months. The price peaked out very close to the 20,000 at the end of 2017 and since then it had lost more than 60% of its value, trading at the 6,966 at the time of writing.
The performance is poor, but according to the research, it is normal. However, an interesting particularity is the fact we are not seeing the first Bitcoin bubble.
Back in 2012-2013, the same thing happened and a smaller scale. The Bitcoin price had surged towards the 1,000 area and then lost 80% of its value. Since then it started to build up towards the levels we saw last year.
No other bubbles included in the research had a similar performance. After the bubble burst, the prices had not gone up substantially. Why is something else happening with Bitcoin? There are some details which should be discussed here.
We believe that happens because the blockchain technology is considered to have a high potential. Also, people are investing a lot of money in cryptocurrencies. In 2017, the ICO market skyrocketed and in 2018 the performance so far is better than expected.
This huge inflow into the digital currency market makes prices pop higher and we could see similar situations taking place in the future, as well.
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