Money Bitcoin: Here's what would happen if the 'bubble' burst (and why it probably won't impact you)

09:11  02 december  2017
09:11  02 december  2017 Source:   MSN

Crypto Bull Tom Lee Doubles Bitcoin Price Target to $11,500

  Crypto Bull Tom Lee Doubles Bitcoin Price Target to $11,500 The bitcoin bulls are charging. A day after hedge fund manager Mike Novogratz said the cryptocurrency will end the year at $10,000, Fundstrat’s Thomas Lee doubled his price target to $11,500 by the middle of 2018 -- a 40 percent gain from current levels.Lee, who heads research at Fundstrat, said a 10 percent pullback earlier this month triggered by the controversial cancellation of an upgrade to bitcoin’s underlying software has set the stage for the coming surge.The November slump “cleaned up weak hands,” Lee wrote Wednesday in a note to clients that almost doubled his last forecast.

Bitcoin has passed the $US11,000 mark. But market analysts are sceptical of the digital currency's meteoric rise. Here ' s why some are predicting a bitcoin crash and why it would send shockwaves through the global financial system.

Housing Bubble , Anthem, Dot-Com, Central Banking, Get all the Latest news, Breaking headlines and Top stories, photos & video in real time about ValueWalk. 26 minutes. 🚀 CRYPTO EXCHANGE NEWS: Bitcoin : Here ' s what would happen if the ' bubble ' burst ( and why it probably won ' t

a close up of a device© Provided by ABC Business Bitcoin has crossed over the $US11,000 mark — briefly — as it continues its whirlwind end to the year.

It's more than welcome news to investors, who are embracing the increasing value of the digital currency, but market analysts are a bit more sceptical.

Here's why some are predicting a bitcoin crash and what would happen if it does.

Bitcoin is a type of digital cryptocurrency that first emerged in 2009.

The reason why everyone keeps talking about it is because it's increased tenfold in its value since the beginning of the year, and is currently worth more than $US10,000 after its value more than doubled since the beginning of October.

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  Bitcoin Blows Past $12,000 Photo. Getty Images The Bitcoin bubble continues to stretch to even more grotesque proportion s, clearing a value of at least $12,007 per bitcoin and attaining a market cap of $200 billion on Sunday, TechCrunch reported. The strong gains more or less put Bitcoin on a path to clear a value of $13,132 by the end of calendar year 2017, and potentially even more.While doomsayers have been predicting a massive crash in the cryptocurrency market for years, Bitcoin has largely continued its trend of explosive growth - for now.

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"The bitcoin phenomenon is almost unprecedented," John Noonan, senior forex analyst at Thomson Noonan, said.

In fact, the cryptocurrency's current market capitalisation — its price multiplied by the number of coins that have been released into the system — is roughly $US214 billion, according to industry website Coinmarketcap.

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All Financial Wisdom. When Will The BitCoin Bubble Burst ? With Bitcoin something similar happens . Although it is a scarce commodity, it serves no purpose. Not here , and therefore the house of cards is more fragile.

When the bubble bursts all of them will be headed for the exit at the same exact time." This is the reason why things like technical analysis work much better in crypto than in equities, because these markets are quite obviously more likely to Now imagine what happens if Bitcoin ever falls again…

To put that in perspective, that is equivalent to the combined market cap of the Commonwealth Bank (at $140 billion) and National Australia Bank (at $80 billion).

Mr Noonan told ABC News Breakfast there are a few reasons that make bitcoin an attractive bet to some investors, including the fact it does not have a central bank and that there is a limited supply of bitcoins.

One of the other factors credited with driving the prices higher has been the announcement that investors will soon be able to bet on bitcoin futures. Even the Nasdaq is reportedly looking at getting in on that.

There's also a great deal of hype going on, fuelled somewhat by the intense media coverage it's been getting lately.

Some experts and economists see the massive growth in bitcoin value over a short period of time as an indication that people are buying because of the hype. They appear to see it as a risky investment at best, extremely volatile at worst.

Bitcoin blasts past $10,000 mark amid bubble concerns

  Bitcoin blasts past $10,000 mark amid bubble concerns The cryptocurrency's value has risen nine-fold since the beginning of the year. Tuesday's trading price gives bitcoin a market capitalization of $168 billion, greater than the vast majority of S&P 500 companies, including Dow 30 components Boeing, Disney and GE.Since its founding in 2009, bitcoin has made a name for itself by allowing for anonymous transactions. The digital currency is now accepted by more than 100,000 merchants worldwide, including Microsoft, Dish and Subway. The cryptocurrency has experienced a massive run in 2017. On Jan. 1 this year, bitcoin was priced at just under $1,000.

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It took 834 days for Bitcoin to top $US1,000, and another 1,270 days to hit $US2,000 on May 20, 2017. But in the later half of this year alone, it has already surpassed $10,000.

It's why analysts are comparing it to Tulip Mania and the dot-com crash. Bloomberg's Stephen Gandel has even estimated that based on valuation, bitcoins are four times more expensive than dot-com stocks were at the height of their bubble.

Over the past two years, the digital currency has experienced numerous crashes, usually every couple of months.

If there was a catastrophic fall in prices, there would be winners and losers.

But it is unlikely to pose a risk to the global economy like other bubbles, according to bitcoin expert Adrian Lee, a senior lecturer in finance at the University of Technology in Sydney.

That's because, for one thing, there's not as much money tied up in bitcoin as there was during the dot-com bubble, Mr Lee says, pointing out that while there is billions in bitcoin, there were trillions spent during the dot-com bubble.

"So [for example], it wouldn't effect the Australia dollar I'd say, because nobody really uses it at the moment," he said.

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It ’ s whether or not the bubble in Bitcoin already popped? This is Bitcoin week at Allstarcharts. I didn’t really intend for this to happen but the phone calls have flooded in lately asking for more Far from it , in fact. I really don’t care if Bitcoin triples from here or goes to zero. It won ’ t affect my life one bit.

What also makes this unique is that it is unlikely people are borrowing to invest in bitcoin, according to RMIT professor of economics Jason Potts.

"There's very little evidence of anyone borrowing money to buy cryptocurrency and if I was a bank or a lender, there's no way I would loan out money to do that," he said.

Our experts said that seemed unlikely. It's still a relatively small number of people with money invested — roughly similar to the amount of people using email in 1994, Mr Potts said. So we're still very much in the early adoption phase.

And Mr Potts said there had not been many retail investors involved. "The sort of people who would hold superannuation funds … they're not in this market and might not be for some time," he said.

That would limit the fallout to the wider economy in a worst-case scenario. "If it crashed, it would only largely be those people who speculate on it, maybe people who use bitcoin and maybe the exchanges may lose money. But then again the exchanges don't require much overhead to run it, so if it fell they'd still be OK," Mr Lee said.

Mr Potts agreed. "It doesn't actually cause catastrophic financial meltdown. Some people who bought at the wrong time would be angry, other people who have been waiting to buy would be happy," he said.

Those who have invested in associated entities, including mining infrastructure and ICO-based businesses, would also lose out, Mr Lee said.

Bitcoin plunges $2,000 after wild record ride past $11,000

  Bitcoin plunges $2,000 after wild record ride past $11,000 Hours after surging past $11,000, bitcoin tumbled almost 20 percent from the high, wiping more than $2,000 from its price in five hours. It traded at $9,340 as of 2:52 p.m. in New York. The heaviest selling came amid reports of service outages and delays on some of the largest online exchanges. The cryptocurrency had rallied 20 percent in just four days, topping $10,000 for the first time earlier this week in a runup that drew increased warnings it was in a bubble. Bitcoin ended September at $4,171.25.

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"The bitcoin miners would take a big hit, these guys who all they do is buy machines to mine bitcoins will lose money when the value falls," Mr Lee said.

He also said the impact on other cryptocurrencies would depend on what sparked the crash.

If it were as a result of central banks cracking down on bitcoin then you would expect the value of other cryptocurrencies to also fall. But if it was because of irrational exuberance, then only those cryptocurrencies that have experienced similarly sharp rises in their value would drop.

Mr Potts says the chances of systematic crash are extremely low.

The bitcoin expert told the ABC that the recent surge in value is not a 'bubble' but a "price discovery".

"Bubbles are things that happen to technologies or commodities or products that we know what they're for, so tulips can have a bubble because you know what they're for, or houses can have a bubble if the price of a house departs wildly from people's ability to pay … but this isn't like that," he said.

"This is a fundamental, radical new technology where every day we're discovering new uses for it and that gets priced in.

"I think what we're observing in this growth of price over the last nine years … is this gradual discovery of more and more uses for it, this gradual confidence in the technology."

Besides, Mr Potts says there's been what could be described as "crashes" in bitcoin every few months. On Wednesday alone, bitcoin rose as much as 15 per cent, but by mid-afternoon (US time) was trading at $US9,500 at one point because of a crash that lasted roughly six hours.

"There's been some big crashes, crashes of up to 80 per cent [of its value] and it's recovered," he said. "What's impressive is that they happen and then it bounces back."

"There's an enormous amount of volatility, but there's also a long-term growth trend in bitcoin in particular. It has grown [apart from 2014] every other year so over in the long-term it's been a solidly performing asset," he said.

"It's just scary to hold."

Bitcoin exchange NiceHash robbed of $64 million from its wallet .
As the value of Bitcoin soars, it also turns holders of large volumes of the currency into prime targets for thieves. For those keeping score, that’s about 4,700 BTC, each worth about $13,617 at the time of the breach.

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