Bitcoin, Cryptocurrency And Blockchain News

Bitcoin’s Bubble Finally Popping? Bank of America Explains Why It Believes So


According to researchers from Bank of America Merrill Lynch (BAML), Bitcoin is one of the “greatest asset price bubbles in history”. Led by the chief investment strategist, Michael Hertnett, the team took made this public on Sunday. While at it, they went as far as categorizing the current market a bubble that is already showing signs of popping even after seeing a 60 percent correction thus far in 2017.

Comparison Chart Put Forth

In an extensive chart that made comparison of Bitcoin with various famous financial maniacs, the banks sought to prove its allegations. Some of the notable financial maniacs included in the list include the South Sea Company of the 18th century, the Mississippi Company, the Dutch tulip bubble, Gold, and the U.S. stock market in 1929.

According to the published chart, the Bitcoin bubble has the greatest appreciation in terms of its asset price by a significant margin. By the time Bitcoin hit its all-time high late last year, its price had grown almost 60 times its initial price 3 years before that. This is in comparison to the biggest bubble before this that is Tulib, believed to have grown by about 40 percent according to the researchers.

Notably, CoinDesk’s Bitcoin Price Index shows that Bitcoin’s price stood at $19,783 at the time it was on its peak on December 17. By the time of writing this piece, it traded at $6,835.

Point Of No Return?

In the chart, BAML showcases the aftermath of famous bubbles in history, complete with their run-up that gave the impression that once the priced crash, their new lower levels, somehow remain their constant and would remain here for long.

However, it would only be fair to note that thus far, this phenomenon has not been proven for Bitcoin. Notably, the recent purported bubble is not Bitcoin’s or even history’s greatest bubble. Earlier statistics clearly show that in 2010, the price of Bitcoin rose up 120-fold in 2010 and 2011 to peak at $11 before it dipped. The rise noted in 2013 and 2014 was also significantly steeper compared to the recent bull market.

Unfair comparison

With this being said however, the note argues that the comparisons between what is happening currently with previous happenings as far as the history of Bitcoin is concerned is unfair. This is because the 2017/2018 bubble saw more capital invested in the market compared to the 2010-2011 of the 2013-2014 one. This is also the same factor that clearly complicates attempts to compare the stock market and Bitcoin.

What do you think about BAML’s allegation that Bitcoin’s Bubble is already popping? Do the reasons for these assertions hold any water?  Let us know of your thoughts in the comments section below.