Bitcoin’s Bubble Trouble

I’m sure all the hype surrounding bitcoin has you eager to find out how to benefit. However, every time bitcoin has surged, it plummeted shortly after.

About seven years ago, I decided to buy my 2-year-old son his first share of stock.

I thought it was a great gesture and a neat idea. The website, GiveAShare.com, puts it in a frame with a nice little quote on it to give as a gift.

In total, it cost me about $100.

It wasn’t much of an investment, though. It was more of a unique gift.

But had I spent that $100 on another item gaining attraction in 2010, I would have made my son a millionaire today.

I’m talking about bitcoin.

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It first came on the scene in 2009 as a digital currency, but it took some time to gain traction. In 2010, a user used 10,000 bitcoins to buy two pizzas and have them delivered. This was the first time it received a concrete value — about $0.003 per coin.

Using that value, had you spent $100 to obtain bitcoins in 2010, you would have $75 million today.

That’s amazing.

And it’s been helped this year, as the price of a bitcoin has more than doubled from about $1,000 to more than $2,000 last week.

With all the hype surrounding the digital currency, I’m sure it has you eager to find out how to benefit. After all, there are funds rapidly trying to bring a bitcoin exchange-traded fund to the market as we sit here, so it may be easier any day now.

One thing about bitcoin, though, at least so far, is that after every massive surge it experiences, it plummets shortly after.

Let me explain.

Sorry to Burst Your Bubble

Bubbles are one thing, but bitcoin is constantly going in and out of bubbles. It has only been around since 2010, yet it has had surges of more than 400%, not once, not twice, but three times, and all in a short time frame.

Today we are going to look at each of these surges and see what they tell us about the latest one.

The first one, and the largest percentagewise, was in 2011 — over 4,000%:

I’m sure all the hype surrounding bitcoin has you eager to find out how to benefit. However, every time bitcoin has surged, it plummeted shortly after.

The price spiked from less than a buck to nearly $30 in just three months. But the following six months saw that rally get wiped out.

The next bubble was in 2013, a 400% pop:

bitcoin2

This spike was erased in just days after the system bitcoin runs on, which is supposed to be unhackable and flawless, broke, causing panic selling.

The spike took just a month, and the collapse was just a day.

Then, just a few months later, there was another huge spike of 900%:

I’m sure all the hype surrounding bitcoin has you eager to find out how to benefit. However, every time bitcoin has surged, it plummeted shortly after.

The jump happened in just two months, but the sell-off lasted over a year — although it still retraced almost the entire rally.

Which brings us to where we are today, another significant spike:

bitcoin4

When the spike technically started is hard to tell. From bottom to top, it started in January 2015 — a two-and-a-half-year rally.

But, more recently, it’s fair to say it started around the $1,000 mark and has nearly tripled since then.

Bitcoin could continue surging, but based on the past bubbles we have seen with it, a collapse seems promising.

Whether it plays out over a few days, a few months or a year, you’ll have a better opportunity to buy bitcoins.

While we all may have the angst of not buying $100 of bitcoin in 2010, don’t make the mistake of chasing the cryptocurrency now.

Regards,

Chad Shoop, CMT
Editor, Automatic Profits Alert

  • guidence

    Might wipe out billions in wealth or could triple. China makes most of the best bitminer hardware. Not Americans selling China made hardware but China selling their bit miner. Bit miner hardware runs bitcoin processing much like Chase, CityBank run Mastercard / Visa processing.
    The Asian influx of cash may be real. Though now its 1/300 of a bitcoin for a $8 pizza 🙂
    Source: https://www.rt.com/business/390075-bitcoin-price-fall-market/
    “Analysts’ forecasts for bitcoin differ significantly. While some predict a major correction, others say it’s going to hit $6,000.
    “There is a lot of fresh liquidity flowing into bitcoin, thanks to a surge in interest among investors in Asia, notably Japan and Korea, coupled with a resolution to the scaling debate. I would not be surprised to see the bitcoin price doubling again to around $6,000 by the end of the year,” Aurelien Menant, CEO of Gatecoin, a regulated cryptocurrency exchange, told CNBC. “

  • Mark Wilgus

    I really doubt that half of Americans buy any crytocurrency! None of the folks in my circle of friends or compatriots are even mildly interested. And that’s a tremendous opportunity for us players because we are still in the early phase of worldwide acceptance. I made the mistake of speculating on Bitcoin and sold too soon at $700. So I moved my small deck to etherium and litecoin and I have tripled in value. Hopefully, these 2 will come close to duplicating Bitcoins huge rise! Buy and hold is my current strategy. What do you think?

  • jrj90620

    Ii wouldn’t call them investors.Speculators would be a better word.It may be telling us that people are too willing to take risk and we are heading for a fall,in stocks,real estate and bitcoins.On the other hand,maybe central banks will come to the rescue and we will see a fall in fiat currencies.

  • guidence

    “What could go wrong”? or “A fool and his / her money are soon parted”
    People are too willing to take risks. Central banks are looking at BitCoin. Canada’s bitcoin is called Can-Coin – can not make this stuff up.
    Since *all* transactions are visible it is my opinion, just an opinion, that China, Russia and others will want that sort of “oversight” and “protection for their people” so there are no “illegal payments, drug trafficking or extortion” possible.
    “Give up a bit of privacy for security” not me.

  • guidence

    Four thoughts.
    1) “Wild west gambling” as there are few market indicators and very little history. One needs an almost “day trader” eye on the market.
    2) Bitcoin is still being mentioned on N.P.R., Wired Magazine, reddit and with the melinal (sp?) hipsters so money and interest is flowing in.
    3) Bitcoin is the “coin of the realm” for bad hackers & drug smugglers and such with few stable alternatives. It may be ugly, but its the best looking ugly one.
    4) Canada has their own official version see https://cancoin.co/ Yes there is talk of the US banks looking at Bitcoin.

    Last observation. The safest way to make money is not investing, but being a broker making a cut of each trade be it good or bad. Bitmining is like being a broker. Yes. Investing has better returns. Bitcoin mining is more stable and becoming more difficult to get into as the rewards will drop and machines get more expensive. Not sure how that will play out.

    Please do ones own research. This is just an overview of how things are now.