Priced at $1000 at the start of the year 2017, Bitcoin is now shy of the $10,000-mark, and has investors questioning if this is a bubble — Google Trends agrees as ‘bitcoin bubble’ becomes a top searched term.
Bitcoin and cryptocurrencies have been the most searched terms on the internet recently. Bitcoin is a virtual currency that emerged in the aftermath of the financial crisis of 2008. Its price has been volatile since the beginning.
Bitcoin climbed more than $1,000 in a week to a record high of $9,732.76 on Monday morning, according to CoinDesk. With various parallels being drawn, the experts were quick to compare bitcoin's surge to the tech-stock bubble of the 1990s.
The data available with Google Trends shows that the search for ‘Bitcoin Bubble’ hit the level 100 early Tuesday around 4:30 am (IST) — the highest in the past seven days.
According to BNP Paribas report, quoted in the media, there seem to be many symptoms of a bubble as far as the prices of cryptocurrencies are concerned. The key feature is that many participants appear to be buying cryptocurrencies because their prices are going up.
Bitcoin has a controlled supply, meaning that the amount of coins that can be created is finite. The Bitcoin protocol is designed in such a way that new bitcoins are being created at a decreasing and predictable rate.
The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. As of June 20, 2017, Bitcoin has reached the total circulation amount of 16.4 million coins, which is about 78 percent of the total amount of Bitcoins that will ever be in existence.
However, BNP Paribas in the same report said that a bubble does not mean that it will burst soon. It depends on a host of factors, not least the possibility of self-fulfilling expectations that the price will continue to rise.
In September, UK’s financial watchdog, Financial Conduct Authority, issued a stern warning against the frenzy over initial coin offerings (ICOs) in cryptocurrencies such as Bitcoin that have been promoted by celebrities, including Paris Hilton.
While the future of Bitcoin is still unknown, traders are free to apply technical trading strategies.
To read more about cryptocurrencies read here.