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Is cryptocurrency a bubble? That’s the 800 billion dollar question. In the past, we have seen Bitcoin hit new all time highs followed by a frenzy of new investors buying their first cryptocurrency.

In this article we will analyze bubbles throughout history, draw parallels with the cryptocurrency market and reveal our buying strategy for cryptocurrencies.

What Is A Bubble?

It is a point in a market cycle where rational investment goes out the window and is replaced by ‘emotional investing’. This type of investment is not driven by the assets actual worth, but by expectations for the future, the fear of missing out and greed.

In financial markets we see ‘emotional investing’ leading to a herd mentality time and time again. If an asset is “hot” then naturally news outlets start to report on the asset more frequently and this increases public awareness and enthusiasm. The result is that more and more new people buy the asset and this pushes up demand and the price increases as a result. We saw this type of behaviour peak with Bitcoin in December 2017, resulting in a $20,000 all time high for Bitcoin.

Once the euphoria subsides then the price corrects. The fall in price is usually driven by denial, fear, capitulation and despair. This is known as the ‘bubble popping’. The thing with market cycles is that they tend to repeat themselves over and over again. A bubble pops and usually a new bullrun is born. This explains Bitcoin’s volatility over the years.


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