Its a great question right? I could argue that there is no real way to know if its a bubble or not until it pops. We could definitely be in a bubble... or not. The best thing someone could have done was buy bitcoin ( or steem!) and never thought about it again until now. Great question. i think about this daily
RE: How Can We Tell If Were In a Bubble, And What Should We Do?
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How Can We Tell If Were In a Bubble, And What Should We Do?
Bitcoin is in a bubble, there is no doubt about it. It jumped off several different trend lines very convincingly. Typically, you can count on an asset to return to the trend line or even dive beneath if the jump was high enough.
But bubbles don't exist in isolation. There has to be an underlying demand for forces to come together and push an asset off the trend line. Bitcoin has a lot of demand which is increasing. The bubble has good reasons behind it, many of which are geopolitical.
I became massively bullish on Bitcoin when the government of India pulled a currency swap scam on their own citizens, in the name of protecting the people agains money launderers, counterfeiters, terrorists, and other boogey men--BOO! (idiots). The real boogey men were the corrupt government officials who found ways to cheat citizens out of cash.
Governments do these kind of scams all the time. Don't think that yours won't either. In fact the Federal Money Printing Scam perpetrated by the US Federal Reserve in cooperation with Congress, the US President, and the Courts, is worse than the Indian government has perpetrated because it is far more insidious, more difficult to explain to the average uneducated yokel, and subtle in its execution.
All of the se State-scale scams undermine the legitimacy and eventual trust in traditional financial systems.
These are the driving forces behind demand for Bitcoin and other cryptocurrencies, and were even motivation for their creation.
Yes we have a bubble, but it is just a blip on a much larger and trend that will eclipse this current bubble eventually.
I welcome and even encourage the suckers to walk away in fear. More for me.
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Thank you for your anaylsis:)
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I find myself asking this exact same question in terms of Tech stocks such as Snapchat and to some extent Tesla...the difficult thing to me is how do you value something that is so new and has such great potential. For most companies there is a comparison you can make to companies that have been around for years and years and they have tangible assets and cashflows that we can measure...but how do you measure something that is so new and has no real competitors to compare to?
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Not sure :) If you figured it out please let me know ASAP
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A good rule of thumb is that when everyone wants in it is more than likely a time to get out. As far as bitcoin and the cryptos go, I would imagine that monitoring the % of posts here at Steemit that are devoted to the cryptos could at least give some clues. I would certainly not be buying right now as a very high % of trending posts are dedicated to cryptos. Wait until people are saying things like "what happened?" or "I bought bitcoin at $2400 and now I'm down 30%, what should I do now?" ...things like that. :-) There are actually ways to measure sentiment of investors in the tech stocks. Let's look at TSLA since you mentioned it. It is now trading well off the highs and this now means that anyone who paid say $320+ is in a position where they are "hoping" to at least get even on their trade. This means that if TSLA stock trades lower than the $290 low that was set in early May those 'hopefuls" will likely abandon ship. That would lead to price targets in the 260-250 area as outlined on this chart.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=tsla&x=56&y=16&time=8&startdate=1%2F4%2F1999&enddate=2%2F18%2F2017&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=8&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=9
The bottom line on how most stocks are priced is sentiment. Price is a function of what anyone is willing to pay at any given time based on their own perceptions. Same with bitcoin, same with how much you are willing to pay for a cup of coffee at Starbux. if price is too high based on your own perception of value you will simply find an alternative or avoid altogether. Buy only at times of fear...sell at times of euphoria. Luckily for traders, investor sentiment can be tracked very easily in the stock market. Maybe not so easily in teh cryptos. But based on this tracking fund for bitcoin that trades on the U.S. equity exchanges...this is EXTREME euphoria. People wanted in at ANY price today. :-)
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=gbtc&x=44&y=13&time=8&startdate=1%2F4%2F1999&enddate=2%2F18%2F2017&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=8&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=9
I'll be posting about various trade opps in the equity markets at my Steemit blog. Hope you will stop by as I will always provide evidence as to whether things are a buy or sell based on what the "sentiment" indicators are saying.
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