The Deputy Prime Minister of Turkey, on Wednesday, tweeted about the bubbling nature of Bitcoin. He tweeted that Bitcoin is the biggest bubble in the history of finance. This has added up to the many comments and predictions which characterizes bitcoin as bubble made by experts. His comment is based on the recent rise of the Bitcoin price which left many people with surprise.
The price started with what people thought to be an abnormal rise but later used few months to show that the earlier fluctuation was a tip of an iceberg.
The Inside Story
Bitcoin has become the talk of the day with laymen and experts voicing out their opinions on its future and nature. Mehmet Simsek, the Deputy Prime Minister of Turkey made his opinion known after a close monitoring of the price movement of the currency.
Simsek warned investors to stay away from it since it can crash as the same way it jumped excessively. “One should stay away from this speculation. Just as Bitcoin price suddenly raises excessively, it could also crash,” he said. He didn’t comment on Etherium which also hit its all-time high
To the hardcore investors of the cryptocurrency, this may mean nothing to them since investment is all about risk-taking.
Turkey Central Bank has a different opinion about this
Murat Centinkaya, the governor of the Central Bank of Ankara has a directly opposite opinion of the deputy Prime Minister. Centinkaya said a month ago that the cryptocurrency can help attain financial stability if designed well.
According to him, they have set up a group of policymakers and regulators including participants to access the digital currency. However, there has been a directive from the Capital Marketing board instructing Brokerages not to trade in the cryptocurrency.
Bitcoin has generated mixed opinions from people of the same institutions, class, and country. Its success in the online trade has won the heart of many to trade in them.
Is Bitcoin Actually a Bubble and will it crash like a Tulip?
William Derringer, a historian at the MIT said that bubbles are normally the results of new financial innovations and new technology. “A lot of bubbles historically involve some kind of new financial technology the effects of which people can’t really predict. These new financial innovations create enthusiasm at a speed that is greater than people are able to reckon with all the consequences.”
When tulip was introduced in the Middle East in the 1630s, it was in great demand. It reached its highest price but later crashed back to normal.
People are therefore tempted to compare the bitcoin price with the tulip mania, expecting it to crash back to normal. Derringer does not see any difference between the Tulip and the Bitcoin:” the value of the thing was not just about a calculation of its economic return but also about the aesthetic value of its coolness.”
Bitcoin surpassed Tulip Mania to be the biggest Bubble ever
In a critical assessment of the comment made by the deputy Prime Minister of Turkey, Bitcoin has indeed risen to surpass the famous 1637 Tulip-mania to become the most Bubble currency ever.
In a month ago, Bitcoin was ranked as the second largest bubble behind the tulip. However, the price reaching $17000 has made it the largest.
“Bitcoin has now gone up over 17 times this year, 64 times over the last three years and superseded that of the Dutch Tulip’s climb over the same frame. “
There have been numerous predictions of Bitcoin, forecasting the price to hit $1 million by 2020. If that happens, Bitcoin will be the all-time largest bubble ever and will be very difficult for any other currency to overtake it.
Aside from surpassing the Dutch tulip, it has also overtaken most of the popular fiat currencies in the world to cling to the 30th position.
This year alone has come with many records being broken and new ones being set by the cryptocurrency.
Higher height is expected to be attained as it is beginning to be accepted as a mode of payment by many other companies and organizations.
The scariest part of Bitcoin is when it ends up being parallel with the Tulip. If it is really a bubble just like the Tulip mania, then it will likely crash as predicted.
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