Bitcoin’s gloomy bubble
There are many ways in which the Bitcoin mania is very similar to past bubbles. From wild trading, to the cult-like devotion of its followers and over-the-top predictions about how it will change the world, it follows a pattern that historians of the market will easily recognise. But there is one way in which it is different. It is surely the gloomiest bubble ever.
Most investment manias surf a wave of euphoria. They are optimistic and forward looking. That was certainly true of the dot-com bubble, when the internet was going to make every chino-clad 20-something a millionaire in a couple of weeks, as well as connecting the world and bringing everyone closer together.
It was true of the space boom of the early Sixties, when we were going to conquer new planets. It was true of the radio boom of the Twenties in the bull market that led up to the great crash. And it was most certainly true of the great railways bubble of the 19th century, when just about anyone with a grand plan for some tracks to somewhere or other could raise a ton of money.
In each case, there was an argument that an exciting new technology would create unprecedented wealth. But Bitcoin is not really like that. It is all about escaping the supervision of governments and central banks, about evading the system, and protecting yourself against calamities.
Perhaps it is a bubble for the Hunger Games generation – dystopian, while most others were utopian. It will still probably end badly, just like all the others. But at least not many dreams will be dashed in the process because the Bitcoiners were so cynical already.
Happy Investing
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