US Senator Warren spoke on the NBC News’ “Meet the Press Reports” show to discuss the state of the cryptocurrency markets and digital currencies generally. When she was asked if bitcoin is “this decade’s property bubble”, she replied:
“The digital world works very much like a bubble. What is it moving up on? It has moved up because people are telling each other it will be great, just as it was in the real estate market.
Senator Warren went on to say:
“How many times did people say: ‘Real estate always goes up. It doesn’t go down. It was a phrase they used decades ago, before the collapse of the real estate bubble. It was before 2008’s crash, in the 2000s.
She believed that cryptocurrencies would one day be regulated and that the US should establish its own Central Bank Digital Currency. But are we really in an ebullient bubble?
Multiple bull markets have been experienced in cryptocurrency that have outperformed traditional assets.
Vanguard estimates that the average return on investing in stocks is 9.9%. However, cryptocurrency investing can bring users anywhere from more than 50% per day to more than 11,177% per year.
These types of returns are not new in the cryptocurrency market. They have sparked discussions about Bitcoin and othercryptocurrencies being in a bubble, or comparable to the Tulip Mania between 1634-1637.
The value of Bitcoin and other cryptocurrency has fluctuated over the years. It went through both bullish (positive price rise) and bearish periods (negative price action).
Is this really a bubble about to burst or are we just in the midst of one? Let’s take a look at the market performance since the creation of cryptocurrency and compare it with where we are today.
We will be focusing on Bitcoin specifically and the multiple “bubbles” it has endured over the years.
Previous Bitcoin “Bubbles”
Bitcoin has seen high prices before it plummeted in value several times since its inception. We will examine the most successful bull markets and their endings.
The 2011 Bitcoin Bull Market
The 2011 Bitcoin price performance – Image courtesy of highcharts.com
Bitcoin started 2011 at 30 cents ($0.30), then rose to a dollar by February and to $10 in June. It then tripled to $30 in a matter of weeks.
A few days later, on June 11, the “bubble” burst, pushing the price to $15 (a half-off). Bitcoin then shot up to $20, before falling to $5. This is right now the biggest “bubble” in Bitcoin’s history.
Bitcoins Growth: Bitcoins value increased by more than 100x in 2011, the largest growth that cryptocurrency has seen. 2011 was Bitcoin’s first bull market. Also known as Bitcoins “first bubble”, it was the year that Bitcoin experienced its first bull market.
The 2013 Bitcoin Bull Market
Bitcoin’s 2013 price performance
Bitcoin’s value experienced two peak years in 2013, before it crashed to the bottom, which led to a bear market that lasted for many years.
Bitcoin started the year with a value of $15, and had reached $50 by March’s middle. One Bitcoin was worth $100 in April. In less than two weeks it had more than doubled in value to make one Bitcoin around $230.
The price dropped to $160 the following day. It then fell to $70 one week later. However, it rebounded to $100 at the end of April.
Bitcoins Growth: Bitcoins’ value rose 17x before the drawdown
After stabilizing at $100 in November, Bitcoin rose to $250. The price of Bitcoin reached $1,100 in November. This is a fourfold increase in just one month.
Bitcoin dropped to $700, indicating that the “bubble” has burst again.
Bitcoins Growth: Bitcoin’s Value grew 11x during the second leg of 2013.
Bitcoin adoption really began to grow in 2013. Coinbase reported that they sold over $1 million of Bitcoins in February 2013, with each Bitcoin selling at over $22.
State officials began to notice the growing popularity of Bitcoin in 2013. Federal Judge Amos Mazzant of Texas’ Fifth Circuit’s Eastern District ruled that Bitcoin was “a currency” and therefore subject to court jurisdiction.
The Finance Ministry of Germany also intervened, classifying Bitcoin in “units of account” (a financial instrument), rather than e–money or functional currency. This classification has tax and legal implications.
The digital currency was also subject to scrutiny when Alan Greenspan (an ex-chairman of the US Federal Reserve) referred to Bitcoin as a “bubble” on December 4, 2013.
Bitcoin’s growth: The total value of Bitcoin grew by 73x in 2013.
The 2017 Bitcoin Bull Market
The 2017 Bitcoin price performance
This was the “bubble” that made cryptocurrency mainstream. Bitcoin started the year at $900, ended it at $20,000 and plunged to $15,000 in 2018.
2017 was a significant year for cryptocurrency, with a lot of media attention and new investors coming to the market. There was also a significant increase in the number of businesses that accept Bitcoin. According to Bitcoin.com, the number of Japanese online retailers that accept bitcoin is expected to rise to more than 260,000 in 2017.
Bitcoin was recognized by traditional financial institutions and legislators as a valid currency. Japan approved legislation that allowed Bitcoin to be used legally as a payment method. Russia, however, stated it would legalize Bitcoin’s use in the same year.
The ICO craze could also have played a part, with an estimated $4.9 trillion raised through ICOs in 2017.
Bitcoins Growth: Bitcoins’ value increased by more than 28 times (2.800% growth), making it the third biggest “bubble” in Bitcoins’ history.
The 2020 Bitcoin Bull Market
Bitcoin’s price performance in 2020
Bitcoin started 2020 at $6,985 and fell to $4,970 on March 12. Bitcoin rose to $9,951 again on April 7, before a gradual climb to $29,001 in December 2020.
A large influx institutional investors from traditional sectors, including pension schemes and investment trusts, was one of the main reasons Bitcoin’s growth in 2020. JP Morgan, an old skeptic, has changed his mind about Bitcoin and now believes that it has a bright future.
Billionaire investor Paul Tudor Jones, MassMutual and the insurance company MassMutual were two of the many names that invested heavily in Bitcoin. These factors added credibility to Bitcoin and indicated that it was becoming more popular.
Other factors that drove the market were the growing popularity of Non-Fungible Token art pieces, and profile pic/picture to proof (PFP), style images such as the Bored Ape Yacht Club collection.
Bitcoin’s Growth: Bitcoin’s Value grew 4.15x by 2020
The 2021 Bitcoin Bull Market
Bitcoin’s price performance for 2021
The year 2021 was not a good one for Bitcoin. It saw its value rise and fall twice. While Bitcoin received more media attention in 2021 than 2020, its price didn’t rise as much compared with 2020.
Bitcoin began 2021 at $29,374. It then soared to $63,503 by April 13th. Then, it fell to $29,807 by July 19. Bitcoin reached its highest point at $67,566 the 11th October. It then fell to $46,666 the following month.
In 2021, institutional investors again played a part in Bitcoin’s growth. MicroStrategy announced that they would be investing more than a billion dollars in Bitcoin.
The Company believes that bitcoin will offer better returns than cash and keep the capital’s value over time. Phong Le, President and CFO of MicroStrategy, stated that we remain committed to our customers as well as our goal to operate a profitable growing business intelligence company.”
PayPal announced that their 400 million users will be able to sell, buy and store cryptocurrencies through their platform.
Jose Fernandez da Ponte is VP & GM Blockchain & Crypto at PayPal.
“We have committed to working with regulators around the globe, including in the UK, to provide our support and meaningfully contribute to shaping digital currencies’ future role in global finance and commerce.
Grayscale, a cryptocurrency investment firm based in the United States, made it possible to invest in major crypto currencies without having to own the underlying assets. The firm was able to see a lot success in 2021. They had been buying up Bitcoin aggressively during that year.
Bitcoin’s Growth: Bitcoin’s Value grew by 2.3x in this period.
Bitcoin today in 2022
Bitcoin started in bearish mode in 2022. It fell from $46k down to $33k, before recovering to its current price of $42k.
We can see that every bull market has brought lower returns if we look back at the performance of Bitcoin in its past years.
2011 – 100×2013 – 73×2017 – 28×2020 – 4.15×2021 – 2.3x
This is not a bubble. It looks more like an emerging market, which is maturing, with volatility decreasing over time.
Like the stock market, Bitcoin and other cryptocurrency will likely go through bull and bear phases. The increased volatility in cryptocurrencies may create the illusion of a market bubble, as the price swings are much more extreme than traditional markets.
U.S. U.S. Senator Warren claims that Crypto is the decade’s bubble. Is that true? CryptoSlate.
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