One of the common points of view of skeptics is that, in fact, any cryptocurrency is a bubble that is not backed up by anything and can burst at any moment. Especially in this case, of course, goes to Bitcoin, since the figures of its value and capitalization really amaze the imagination of many.
What is a bubble? In fact, we can talk about a bubble in cases where we observe how more and more money is being pumped into a popular asset, investment expectations are growing at a breakneck pace, and the value of this asset is not growing. It grows at a rate that is much lower than the rate of growth of expectations. At a certain stage, a moment comes when the gap between the expected and real value becomes critical – and then the bubble bursts, creating serious inconvenience for all involved.
You can’t argue with the fact that there is a grain of truth in the allegations that today such risks are to some extent manifested in the case of Bitcoin, efirium and other cryptocurrencies that demonstrate rapid growth. However, it does not follow from the final conclusion that any prudent person should stay away from cryptocurrency and in no case consider these hopeless bubbles as a promising investment target.
In fact, when cryptocurrency is gaining popularity due to certain circumstances, investors support its growth with new and new cash infusions. In fact, there is no clearly defined top level here. There is no speed at which money can be pumped and depends directly on the number of investors, as well as on the individual zeal of each of them.
However, the real value of cryptocurrency can not grow at an arbitrary rate, and this is precisely the catch. Even the most advanced cryptocurrency can not increase its value as quickly as the amount of money invested in it increases. The cryptocurrency market ecosystem is able to grow only at the speed with which the groups of people involved are able to develop new services, introduce new functions into existing software, offer new solutions to the market, create new businesses, and launch innovations to improve the market infrastructure.
It is quite natural that solving such problems takes time, and often quite a lot – as a result, we get real benefits and real value. Nevertheless, at a certain stage, the disproportion is still there, the amount of money has already become quite large, and the amount of value supported by real business is still lagging. If it were objectively possible to start all these useful businesses at an arbitrary speed, this disproportion would not have arisen, and any talk about inflating a cryptocurrency bubble would be superfluous.
However, there is one more, more obvious factor, which is often forgotten, voicing warnings on the results of the next jump in the price of Bitcoin or some other cryptocurrency.
Even in spite of the aforementioned imbalances, as the number of users grows, not only the price of an asset grows, but also the value of cryptocurrency itself.
What is the global value of a currency as such? In the first place – the ability to use it for settlements with other people. Of course, no one needs a cryptocurrency, which is suitable for settlements with only a few hundred people, and its instrumental value is extremely low. However, if a cryptocurrency becomes so in demand that it allows you to freely conduct settlements with millions of people around the world, its value is undeniable. Thus, the growth in the number of users, the increase in prices and the increase in value are in balance, and in this case there is no reason to say that a bubble is inflated.
Naturally, in the case of cryptocurrency is not so simple. It is often possible to observe a situation where the number of users of a cryptocurrency and its actual value remain approximately at the same level, while the price significantly goes up and down over a short period of time. This suggests that a certain speculative component is still present, and that it becomes the cause of instability, which takes the shape of a bubble, which then deflates, then swells again for no apparent reason.
Nevertheless, the core of any claimed cryptocurrency still consists of value, and the rapid growth of the ecosystem, infrastructure and media component of the cryptocurrency market serves as a convincing confirmation.