Understand the rise of the Bitcoin and anticipate its future.

crypto

Recently, we have been hearing from everyone, whether neophytes or the biggest names in market finance, about the same subject: crypto-currency. And more particularly its spearhead: the Bitcoin. The latter crystallizes to itself the worst fears, or on the contrary the best expectations in a world where central banks and banks no longer play their roles. Let us look at this phenomenon.

Bitcoin is a cryptocurrency, i. e. a currency that can be used on the Internet. It is therefore not a real currency as the dollar or the euro is. Its attraction is to be decentralized so that the counterparty risk is eliminated with “American domination”. This fear that the American administration would follow our lives was the leitmotif of the creators of cryptos, so that we can create a currency without being controlled. Basically this kind of currency has been echoed by people from the black internet and drug, arms, human and other traffickers in order to “legalize” their currencies. Indeed, Bitcoin has an intrinsic value and a conversion rate against an official currency. Exchanges were therefore possible.

The first BIT/USD quotation was issued on October 5, 2009, at that time the rate was $0.000764. This phenomenon could have been forgotten as a fashion or an insider system destined to disappear because it would only be fuelled by thugs and criminals. But today the Bitcoin is at $11,200 for the quotation of November 29, 2017. How could this have happened?

Let us look empirically at its evolution. It took him more than 1,300 days to exceed the $1,000 rate, it takes about 1,000 days to see him pass the $2,000 threshold, it takes more than 1,100 days to reach $3,000 and then a dazzling acceleration less than 500 days to exceed $4,000, 150 to go to $5,000, less than 100 to punch the $6,000, etc. Today, he has surpassed $10,000 and goes up to $11,000, no one knows where he will stop. Some analysts announce it at 40,000 by December 2018.

The Bitcoin phenomenon became more important at the time of Brexit. On June 24, 2016, when the British vote to leave Europe was read, all world stock exchanges fell by an average of two figures. At the same time, Bitcoin took +9%. Since then, the world authorities have been discussing more and more the possible legalization of this crypto. And it was this breach that accelerated the price of Bitcoin. On the first day of this year it exceeds the symbolic bar of $1,000. Despite the “attempts” of the Bank of China and some other major banks to destabilize Bitcoin, it is on the rise again because it is not totally excluded from the future stock market. So much so, that on June 6, after giving its position against Bitcoin, causing the price of Bitcoin to fall by more than 30% in January, the Bank of China agreed to allow its platforms to use Bitcoin as a means of payment. Recently, Goldman Sachs announced, through its PGD Lloyd Blankfein, that it would create a desk specializing in bitcoin and thus deal massively with it.

The future of Bitcoin fuels all questions. Some see it collapse after exceeding $11,500, others see it rise relentlessly to the $40,000 threshold in December 2018! Who believes? What if you are an investor? Where to position yourself? Long? Shorts?

Before giving an opinion on the question, let us take a look at the history of market finance. As Soviet economist and mathematician Nikolai Kondratiev has shown, the economy reacts in cyclical waves. The market would have a memory and as a result, inevitably our future would only be a past that resurfaces from time to time. The Bitcoin phenomenon is criticized and often compared to a bubble. A bubble is a more or less long process that causes stock market values to rise without any particular underlying. We’re talking about a hype. This hype allows them to go up and up. Problem, the trees don’t go up to the sky and inevitably at some point our bubble bursts and there it is the fall of the values. We have experienced many speculative bubbles: the internet bubble, the real estate bubble, the subprime bubble, the US debt bubble, the Japanese debt bubble, etc. Looking at some of these bubbles I was struck by the similarity with one of them: the bubble of “tulipomania” from 1622. This phenomenon regained its nobility thanks to Gordon Gekko, an unscrupulous but very smart investor in the economy and market in the Wall Street saga.

Tulipomania began with an infernal craze for this flower from Constantinople. At the beginning only the rich (bourgeois, nobles, kings, princes, etc.) could afford and plant these luxury products. Then it became more democratic thanks to the Arts (especially Flemish painting), and everyone wanted to produce it and then sell it again. The tulip comes from an onion. And in each onion, there are bulbs that can contain a tulip. But the flowering rate is very low. And in addition, it takes 7 to 12 years to produce a tulip. This has therefore led to the emergence of the first option and futures contracts. Market operators bet on the value of the next flowering in each tulip onion. And this title deed has been transmitted several times from hand to hand, exchanged at the rate of successive purchases and sales. The futures market was born. But while for a long time the prices of bulbs were only showing, one day nobody wanted to buy a bulb anymore and panicked, all the Dutch stock exchanges saw the price of the tulip fall sharply and even disappear. It is to this day, one if not the largest speculation bubble that history is known. However, if we look at the tulipomania curve we can see that the bubble around the tulip in the Netherlands has multiplied by more than 50 times its initial price. Recently a graph has emerged with an overlay of the different speculation bubbles we have known. And we can observe (for the moment at least) a surprising superposition of the exact bitcoin curve to that of Tulipomania. That is why, in my opinion, the bitcoin will follow the same direction as the tulip. It is only a matter of time before the effect around the Bitcoin runs out of steam and rinses out all the bearers of this pseudo currency.

 

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