The Bitcoin Nubble

BITCOIN BUBBLE

Dr. Jean-Paul Rodrigue a professor at the Department of Global Studies and Geography at Hofstra University in New York, became well known for his bubble (Luke parker, 2017). His model and chart predict bubbles in many investment types, including stock markets, bond markets and now cryptocurrencies.

Defining market terms like the “Bull trap,” the chart explores the lifecycle of a bubble, concluding that technology moving through it is all in one of four distinct stages; Stealth, Awareness, Mania, and Blow-off. When analyzing the coins chart we can clearly see that bitcoin has been going through these four stages today (Luke parker, 2017).

chart(Luke parker, 2017)

The First Phase, STEALTH:

Only the investors “who understand the new fundamentals realize an emerging opportunity for substantial future appreciation get involved in the asset”(Luke parker 2017) The price begins to slightly increase gradually but totally unnoticed by the general public. The asset in this phase is not yet known by the general people and is not yet available for trading on all platforms. The first stealth phase in the first bubble has lasted approximately 4 years of bitcoins life , because till 2013 the vast majority of the world hadn’t heard of bitcoin . (approximately 1 per 500.000 knew what it was ) (Luke parker2017)

The Second Phase, AWARNESS:

Is the phase where a momentum is noticed by outside investors who start to bring money in and what pushes the price to go higher. This is when institutional investors star to invest in the asset. (luke parker 2017)

In the later stages of this phase the media starts to notice with positive reports about the how the asset is making its way to popularity among its known community. This Is when new people start investing in the asset and the new predictions start to make headlines about how the price will skyrocket in the next upcoming period.

The MANIA Phase of the bubble:

Is the period where the general public notice that the price is going up real fast and is in a momentum and everyone is in a race for the investment opportunity of a lifetime. ," Dr. Rodrigue described. “This phase is however not about logic, but a lot about psychology. (Luke parker 2017)

This phase sees floods of money from new investors, the public, who may not have an understanding of the investment, pushing prices to all-time highs. Meanwhile “the smart money as well as many institutional investors are quietly pulling out and selling their assets.”(Luke parker 2017)

The final stage of this phase is the preparation for the next stage but only a few people may know it and can predict exactly when it may happen. This is a very critical and insider game.

The Final Phase of the Bubble, BLOW OFF:

Everybody is trying to unload their asset at the same time which leads to a massive drop in prices. The price has reached a new high level in the previous phase and everyone is cashing out their investment profit . The Prices plummet at a rate much faster than the one that inflated the bubble.(luke parker 2017)