Is it a bubble? This is one question which is frequently being asked by those who are new to the concept and industry of virtual currencies or perhaps by those who have just taken a first look at it for the first time. The term “Bubble” comes from the volatility of value that goes along with it. The concept of the “Bitcoin bubble” has fascinated people for years now – there have been many claims and calls that the value of the Bitcoin virtual currency has significantly inflated over the years, on various occasions. In this article, shall attempt to shed some light on the mystery of the so-called “Bubble”.
First of all, we should know what a “buble” is. In the field of finance, a “buble” is typically an item that has been a hot topic of conversation for quite some time, whereby it’s price has escalated to an abnormal level and may even have had an exit point. For the purposes of this article, the definition of “a bubble” will be limited to the period of time during which the value of the cryptocoin was on an upward trajectory.
During this time, there were a number of currencies which comprised theBitcoin community. One of these was the South Korean Won, which was then considered as a high-value currency. This trend caused a significant increase in the demand for the virtual currency, and soon afterwards, several other currencies joined in the fold. As you can imagine, this created quite a surge in value for all the currencies, and the result is that today, there is a large number of people starting to trade in the numerous altitudes of these cryptosystems.
At the same time, the value of these currencies were increasing exponentially, and this created a huge demand for more investors and traders. As the volume of trading grew, so did the number of sellers, who tried to get their hands on as much of this valuable product as they could. As is typical when dealing with bubble bursts, the supply exceeds the demand. And so, the price of this highly volatile coin shot up into the sky and was followed by several massive drops before stabilizing again. It is important to understand that when this happens, it is a clear indication that the value of a particular coin is on the rise and is headed for major success.
Now let’s have a look at the second question, which is this “is it a bubble”? In my opinion, this question is not relevant for the long term. This is because many entrepreneurs, speculators and investors are always in the lookout for new opportunities to make profits. When the value of a specific currency is on an upward trend, it is considered as a good investment. If you are someone who is looking forward to investing in the future of this exciting digital asset, I would recommend you stay well away from the “Bubble” question.
However, if you consider the possibility that some future breakthrough will be achieved and the value of Cryptocurrencies will go sky high, then you may want to look out for a big top and a big crash. When people start dumping large amounts of their shares in the hope of seeing a top, they can no longer afford to buy large blocks of coins at a time when the supply is far below the demand. When this happens, the value of a particular asset starts to fall, and the price of other assets begin to soar upwards.
To me, considering the fact that there are presently approximately three hundred million Bitcoins in circulation, it seems unlikely that this virtual asset will suffer a large loss. Even if the total number of coins is reduced by half, there will be hardly any effect on the price. There have been several occasions when the value of a particular currency has halved in a matter of weeks, only to recover soon afterwards. Therefore, there is no reason to expect a major bubble burst in Cryptocurrency. In fact, there is a very strong possibility that the popularity of these currencies will continue to rise, making it even easier for people to convert their local currencies into those of other countries using the most advanced technologies.
Another question that you might have is “why should I sell my current coins and why should I hold onto my own money?” Again, I would advise you to invest in other assets, such as gold. Why? Because gold is not affected by market fluctuations and it is not affected by government intervention. Furthermore, it is important for you to remember that all traditional markets will be affected by a potential currency bubble. Holding onto your precious metals for the time being is the best thing you can do to ensure that you are able to ride out any market fluctuations and hopefully profit from them.
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