Part 2: Is Steemit.com a Speculative Bubble or a Pump and Dump?

As promised in "Is Steemit a Ponzi?" I will be evaluating Speculative Bubbles and Pumps and Dumps as Part 2.

Crypto land is highly susseptable to Speculative Bubbles and Pumps and Dumps. To illistrate this lets examine the two cryprocurrencies with the highest market capitalisations, ether and bitcoin and the recent Pump and Dump of a low cap coin Neoscoin.

However, first up a definition of what these two market terms mean.

A speculative bubble is usually caused by exaggerated expectations of
future growth, price appreciation, or other events that could cause an
increase in asset values. This drives trading volumes higher, and as
more investors rally around the heightened expectation, buyers
outnumber sellers, pushing prices beyond what an objective analysis of
intrinsic value would suggest.

The bubble is not completed until prices fall back down to normalized
levels; this usually involves a period of steep decline in price
during which most investors panic and sell out of their investments.

Read more: Speculative Bubble Definition | Investopedia
http://www.investopedia.com/terms/s/speculativebubble.asp#ixzz4ALAyl5lQ

The Pump and Dump this is the Stock Market definition, No protections in CryptoLand

Pump and dump is a scheme that attempts to boost the price of a stock
through recommendations based on false, misleading or greatly
exaggerated statements. The perpetrators of this scheme, who already
have an established position in the company's stock, sell their
positions after the hype has led to a higher share price. This
practice is illegal based on securities law and can lead to heavy
fines.

The victims of this scheme will often lose a considerable amount of
their investment as the stock often falls back down after the process
is complete.

Read more: Pump And Dump Definition | Investopedia
http://www.investopedia.com/terms/p/pumpanddump.asp#ixzz4ALBao0sA

So lets dive straight into Bitcoin and Ether Bubbles:

Below is a graph covering Ether and Bitcoin prices since December 2015.

Interest in Ether began to pick up in January 2016 but at POINT 1 (March 1st 2016) Microsoft certified Etherium Blockchain offering.
http://www.coindesk.com/microsoft-ethereum-startup-blockchain/

Expectation, Hype and Speculation was rampant and the price spiked, with little correction, until Ether had a market capitalization of over $ 1 Billion

The bubble burst as bubbles always do and the price went into steady decline. The decline was only halted due to Buying pressure as a result of the beginning of The DOA funding period POINT 2

After the DOA funding passed $115 Million it become the highest crowdfunding exercise of all time. Mainstream media like Forbes, Bloomberg etc. picked up on the story things went wild again POINT 3 but quickly collapsed after all the hype died down and Bitcoin began its own rally.

There has been much anticipation and expectation of a Bitcoin price increasing due to the upcoming mining-reward halving. The price finally ballooned POINT 4 once it broke through its long time resistance level of $465.

As you can see price bubbles can inflate rapidly but they generally deflate just as viciously.

I discussed Pump and Dumps in detail here:
https://steemit.com/steem/@gavvet/understand-steem-the-crypto-currency-and-dont-get-burned

We had a spectacular one yesterday on Poloniex with Neoscoin

the price went from 9032 satoshi to 35900 satoshi in less than an hour, that's a whopping 1450% growth. It fell down just as quickly but had another little pump an hour or so later.

Steem the Crypto-currency will be likely to experience the same types of volatility however Steemit with its Steem Power and Steem Dollar bring things to the mix that will likely have a damping effect and lend stability to the steemit.com platform .

In "Part 3 Considerations for the future" I will discuss aspects of the platforms growth that will further influence stability.