Bitcoin – another Tulip boom

30 November 2017 8:51 am

Much has been made of Bitcoing surging past $11,000

Bitcoin has risen tenfold in value so far this year, the largest gain of all asset classes. Everyone from Wall Street executives to venture capitalists have been weighing in with their forecasts. Some are sceptical and some are tipping Bitcoin will “go to the moon”. CME Group says it plans to start offering futures contracts for Bitcoin, which could begin trading in December, pushing it into mainstream investing and increasing the value even further.

Bitcoin has all the makings of another tulip disaster. There was a boom of tulip prices in Holland in the 17 century. Around 1636, tulip bulbs were traded on the stock exchanges of numerous Dutch towns and cities, encouraging all members of society to speculate in the markets. Many people traded or sold possessions, including properties, to participate in the tulip market mania.

The bottom fell out of the market in 1637. Prices started slipping and sellers panicked. The value of prize tulips fell from 6000 florins to 400 as it dawned on people they owned bulbs, not assets. People were wiped out.

The same problem is with Bitcoin. The boom in Bitcoin is parabolic and parabolic and parabolic moves don’t last.

Right now there are Bitcoin holdings worth hundreds of millions of dollars. There will come a point where whale traders will sell a moderately large blcoks of their assets below the market rate. That will cause a panic sell-off by small traders and the price will crash. The whale will then scoop up the Bitcoin assets when they have reached a satisfactory low.

Traders call that practice “shaking out weak hands”.

The Bitcoin boom tells us that nothing changes. Such is the madness of crowds.

Leon Gettler

2017

December

02 Dec 2017 - What to expect now that Michael Flynn has pleaded guilty

November

30 Nov 2017 - Bitcoin – another Tulip boom

29 Nov 2017 - The irony of the link between citizenship, refugees and indigenous affairs

October

22 Oct 2017 - Trump vow to declassify Kennedy files is a distraction

07 Oct 2017 - What’s ahead for the Minerals Council of Australia?

September

16 Sep 2017 - Australia’s energy crisis shows the stupidity of privatisation

09 Sep 2017 - Why climate change will devastate Florida

July

16 Jul 2017 - Laws of mathematics don’t apply to Australia: Malcolm Turnbull

June

17 Jun 2017 - Political backlash over the Grenfell fire

11 Jun 2017 - A win for Macron is a lesson for Theresa May

04 Jun 2017 - Attacks in London could change the election

May

28 May 2017 - Why Donald Trump will survive and be re-elected in 2020

20 May 2017 - Will the Mueller probe examine Trump’s Russian business ties?

13 May 2017 - Hypocrisy over Chloe Shorten’s necklace

06 May 2017 - Macron vs Le Pen: France is no longer one country

April

29 Apr 2017 - Turnbull government attacks banks over Adani

23 Apr 2017 - Why the French election is important

08 Apr 2017 - Russian navy moves in

01 Apr 2017 - Australia is one of the world’s worst money laundering property markets

March

19 Mar 2017 - Peter Dutton goes poofter bashing

04 Mar 2017 - Trump will take the market to a fiscal bloodbath

February

26 Feb 2017 - Trump’s mental condition

18 Feb 2017 - Adani’s results tell us the company will not develop in Australia

11 Feb 2017 - Why the Coalition’s “clean coal” plan is crap

04 Feb 2017 - It’s Trump versus the courts

January

27 Jan 2017 - The cost of Trump's wall on consumers

21 Jan 2017 - A look at Europe's future

20 Jan 2017 - Can Trump make America great again?

16 Jan 2017 - Trump parallels with Iraq


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