Why Bitcoin’s Price Isn’t A Bubble

Naeem Aslam, a Forbes contributor and a veteran trader, takes on the consensus in the investment community that bitcoin’s price is a big bubble waiting to crash. The perception exists in the investment community largely on account of the number of bubbles that have come and gone since its birth, Aslam noted. These include the tech crash that saw the NASDAQ index fall 78% in 30 months ending in 2002.

Aslam pointed out that the NASDAQ index not only recovered from the 2002 crash, but has gained 26% since recovering its losses, meaning it is up 486% over the crash’s low point.

As for bitcoin, every country is interested in cryptocurrency, he noted.

What Makes Bitcoin Different
Aslam said the global audience for bitcoin today is larger than for the world’s largest stock market, the U.S. stock market.

Additional factors include the fact that there is a limited supply of bitcoin and that it cannot be counterfeited.

What’s more, bitcoin is “perfect for the new technological world,” he said. Consumers are shopping more on the Internet. Consumers are switching from fiat currency to bitcoin, he noted, and this further builds the demand for bitcoin.

What About Volatility?
Aslam does not discount bitcoin’s volatility. Speculators are always moving in and out of it, which causes volatility. But bitcoin’s recent pricing action indicates that pricing activity is largely due to influxes of capital from Japan and Korea.

Aslam points out other developments that address the volatility issue.

The New York Agreement in May resolved to address political governance of bitcoin. Australia is also planning to regulate cryptocurrency exchanges, which will provide more transparency and allocate more authority to the Australian Financial Intelligence Agency.

In time, there will be more products such as exchange traded funds for bitcoin, which are likely to find strong demand and will also help stabilize the price.

Bitcoin has jumped nearly 645 this month as it approaches the $5,000 mark.

Today, Aug. 22, the firsts SegWit transaction is scheduled. If it succeeds, it will improve confidence and spur more bitcoin investment.On Nov. 22, a bitcoin hard fork is planned that will double the bitcoin block size.