The recent fluctuations in the Blockchain Market have made us wonder whether the Blockchain Bubble is true or not. Current investors are already worried about their investments in the Blockchain market and the future. New investors are still curious if it’s an excellent time to put in money or not.
What is a Blockchain Bubble?
A bubble occurs when the assets are priced higher than their actual value in the market. Various factors are considered when valuing investments and assets, including demand, growth potential, earnings and others. However, in some cases, an asset’s value will increase more than expected.
Here are some of the circumstances under which a Blockchain Bubble forms:
– A surge in value attracts investors, who invest in the asset, further increasing its value.
– Rapid price increases are caused by excitement over a specific asset.
– More investors will increase the asset’s value, causing its price to exceed its intrinsic value.
Not all of the rapid price increases indicate a Blockchain Bubble. For example, asset price increases may occur due to recovery periods after a recession. The significant difference in the price increase can be justified by the factors used to evaluate an investment.
Are We in a Blockchain Bubble?
Currently, it isn’t easy to assess whether the values of different cryptocurrencies could be justified or if they are being overvalued due to the excitement created in the market.
Other traditional investments are valued based on their business performance or financial metrics, whereas cryptocurrencies are primarily based on factors like competition, cost of production and demand.
Bitcoin, one of the leading and most popular cryptocurrencies, has been said to have many bubbles over the past few years now:
– At the end of 2017, its price had reached over $13,000 before bursting.
– By mid of 2019, its value rose from $3,400 to $12,000 drastically.
– Finally in 2021, after continuous dips and peaks, Bitcoin reached an astonishing $61,000.
While Bitcoin’s current price has since fallen to its current value of $20,290 as of 31st August 2022, it is still higher than what other skeptics had imagined it would reach when it was first introduced. There are no specific reasons for the fluctuations in Bitcoin’s value since a majority of the value is derived from just speculation only.
How does the Blockchain Bubble Work?
In the Blockchain market or any other market, here is how the bubble forms and pops in similar ways:
– A bubble typically begins when investor changes their perspectives on a particular investment. In this case, a new investment opportunity may have been created by the invention of cryptocurrency.
– A potential gain from the investment will then be discussed with investors.
– Speculators will then begin taking risks, increasing prices and attracting even more investors. Using Bitcoin as an example, its rapid growth period from 2017 to 2019 illustrated this exact phase.
– There will be many new investors attracted to the bubble at its peak who believe there is little risk and plenty to gain. As a result, they may make unfounded investment decisions, further increasing the stock price.
– A few investors may lose money, causing others to sell their shares. The Snowball Effect occurs and while some investors may make huge profits, those who are too late to sell may suffer significant losses, making the investment price drop.
The Future of Blockchain?
The Blockchain market’s future is expected to triple by the year 2030. While more and more individuals, businesses and governments are taking an interest in cryptocurrencies, there is still a lot of skepticism surrounding the value of cryptocurrencies and how to implement balanced regulations.
People who have invested in Blockchains have identified benefits such as easy payment management, quick accessibility and working directly with individuals rather than the involvement of third parties like banks and other organizations. However, many people are still insecure about their assets and their volatility.
Factors like these are the reason for the mixed feelings surrounding the giant corporations investing in Blockchain and having government-placed regulations on the Blockchain market. Since many investors are still interested in using the cryptocurrency’s non-traditional system, they are even more skeptical of it becoming more corporate.
Moving further, individuals, businesses, or governments will need to work on a system that will help balance the need for regulations with the desire to keep the existing P2P structure of the Blockchain networks.
Bubble or Revolution: Final Verdict?
It is still difficult to determine whether the Blockchain Bubble will pop out or Revolutionize the world completely. Many people, including a lot of investors, are still unsure if they should invest in the Blockchain market or not.
When making investment decisions in the Blockchain market, individuals should consider all the pros and cons behind investing their money. For example, if a person wants to invest in cryptocurrencies just because they want to join the crowd. Instead, they should take more time to analyze if their investment would make sense in the long run or not. You never know what the future of Blockchain holds and whether the bubble will pop or not.
A Penny for Your Thoughts!