Cryptocurrencies have been the word on everyone’s lips over the last quarter or so. While the value of some major currencies such as Bitcoin have continued to climb sharply over the last few months, many commentators are beginning to point to signs that Blockchain is a massive bubble and we could be heading for a severe correction in 2018. In this article, we’ll take a look at the evidence they’re pointing to and weigh up the chances of Blockchain having a volatile time in 2018.
Classic Signs Of A Bubble
The easy parallel to draw with Blockchain is the dot-com boom of the late nineties and early noughties. The similarity is obvious. Both are technologies that, if we’re honest, are little understood by many traders but which many people in the know believe have the potential to be very big in the future. This creates a significant desire among traders to ‘get in on the ground floor’ and buy up as many assets as they can, believing that the price could multiply 100 fold or more in the future if they bet on the right horse.
Bitcoin Live Chart
It’s at this point that one serious risk starts to appear. Members of the public, upon seeing the massive rise in Blockchain assets, decide that they would like a piece of the action and get involved themselves. In theory, this is fine, so long as they understand the risks they are taking and can afford to lose the money that they are investing.
However, the 10 fold rise in searches for ‘how to buy Bitcoin on a credit card‘ tells a rather different story. If people are leaving themselves overexposed in an attempt to cash-in on the cryptocurrency boom, then we could be setting ourselves up for serious problems in the wider economy in the event of a significant fall in the value of cryptocurrencies.
Will this fall come? The massive fall in Bitcoin on the final trading day before Christmas 2017 shows that volatility has not left the market. If big swings cause retail investors to panic, then we could quickly see any fall becoming a self-fulfilling prophecy.