Why Bitcoin Is Not A Bubble

Many financial experts believe bitcoin is a bubble. This is understandable because of the way they view money generally. Most financial experts study money markets such as the sharemarket. These markets are full of traders moving money around with the aim of taking profits. They see money as an investment and a bubble to these experts is the result of lots of people blindly rushing into a certain stock or commodity to make a profit. This is why they compare bitcoin to Tulipmania and other such disastrous bubbles but they are wrong and here is why.

Bitcoin is based on relatively new technology known as the blockchain. Comparing it to stocks is therefore misguided at best and irresponsible at worst. I'm not saying there aren't traders in bitcoin because there are clearly those looking to make a profit by buying high and selling low but ultimately they will only make up a small percentage of bitcoin holders. Now the reason technology experts are so excited about bitcoin is because they see it very differently. They see what the financial experts do not see. They see a rising technology and its something they have seen before. To technology experts the growth of bitcoin is following a familiar predictable pattern and they are confident it will be as popular as email in a decade or less.

Instead of comparing bitcoin to financial markets it must be compared to disruptive technologies. Think of online publishing. In the early days the well-established media outlets such as TV, radio, newspaper etc did not see that their business was about to be disrupted. Little did they suspect that Google and Facebook would take massive amounts of their advertising revenue within a decade. Traditional media outlets held on to their outdated business models till their death. They simply could not see the tsunami heading their way and this is exactly what's happening to our financial institutions. Bitcoin is in the next tsunami and they are ignoring at their own peril. If they were to embrace it rather than calling it a bubble they would probably benefit hugely. History is dotted with missed opportunities by big players who don't want to see the writing on the wall.

In the early days of computing IBM did not believe that there was an market for personal computers. They missed a huge opportunity and they were supposed to be the experts. Microsoft seized this opportunity instead. It took probably around 10 years for Microsoft to replace IBM as the world's number one computer company. Ironically Microsoft missed the opportunity offered by the Internet revolution which was ‘search'. As we know Google took this up instead. In both cases the financial experts would've said that these were bubbles. They would've predicted that people would have sold off the computers or the novelty of search would die off when they went out of fashion at some point. As we know this did not happen.

A better example might be financial transactions on the Internet. I quite clearly remember in the 90s when many experts claimed that people would never buy items on the Internet. They assured traditional businesses they had nothing to fear. This was at a time when online retailers were like novelties. Today the biggest retailers are online. Amazon went from insignificant to the world's biggest retailer in a little over a decade. Traditional retailers all over the world are now feeling the pinch. Many are closing their doors or struggling to make a profit. One notable example is Macy’s who closed down 68 stores and put around 10,000 people out of work. When you ignore disruptive technologies you'll inevitably pay the price.

We do not see these businesses as bubbles. Yes they will taper off at some point which is known as the classic S curve but they will be around for a longtime and there won’t be any bubble bursting. Its worth noting that a business like Amazon should still be regarded as technology because they leveraged the technology of the Internet whereas traditional businesses either did not or were slow to the game. Bitcoin is not some typical investment vehicle. It's a new way of storing wealth and transferring value. The reason bitcoin is not a bubble in case you missed it is because most people who will ultimately own bitcoin will not be traders. More and more people will be storing money as bitcoin and more and more retailers will accept bitcoin as payment. It will become ubiquitous and we will use bitcoin to send money whether it be to make a purchase, to pay a bill, to make a donation, to send money to a friend etc. As was once said it will become the email of money.

Finally the reason many technology experts claim bitcoin could go to $1 million is because mathematically its in inevitable if it becomes the accepted store of value and means of value transfer. Yes something may happen to disrupt bitcoin but something could happen to disrupt the Internet, Amazon, Google, Facebook and so on. Anything can be disrupted but the point of this article is to make it clear that this is not a bubble but the growth of disruptive technology. Financial experts are not technology experts so their bubble predictions should not be taken seriously.