In the midst of ongoing discussions surrounding the potential “bubble-bust” of Bitcoin and the broader crypto market, it becomes crucial to stay informed and vigilant about the developments taking place over the weekend.
As of this writing, the current value of Bitcoin (BTC) is $69,333.17, reflecting a 1.0% increase since yesterday and a 0.5% increase from an hour ago. BTC is currently 1.1% more valuable than it was seven days ago. The token reached a new all-time high of nearly $73,798 this week.
Bitcoin bubble talks make an industry comeback
The Federal Reserve’s monetary policy has fueled rallies in global equities, bonds, and crypto in recent months. Still, investors are reconsidering such bets after seeing evidence of continuing inflationary pressure in the United States.
In a Bloomberg Television interview, Bank of America Corp. Chief Investment Strategist Michael Hartnett said the record-breaking ascent of the technology sector’s so-called Magnificent Seven equities, as well as the all-time highs in crypto, are exhibiting bubble characteristics.
The comments contribute to a live debate on whether various markets are vulnerable to a fall on Wall Street. BTC advocates refer to over $12 billion in net inflows into specialized US exchange-traded funds since their inception on January 11 as fundamental support, as well as an impending reduction in the token’s supply increase.
What is Bitcoin’s bubble bust?
The term “Bitcoin bubble-bust” refers to the concept of a speculative bubble in the value of Bitcoin, followed by a sudden and significant decline in its price. This phenomenon is often associated with the rapid and unsustainable increase in the value of BTC, driven by speculative trading and investor hype, which leads to a point where the price becomes significantly disconnected from its intrinsic value.
When the bubble eventually bursts, it results in a sharp and often dramatic decrease in Bitcoin’s price, causing substantial financial losses for investors who bought in at the peak of the bubble. The burst of the bubble can be triggered by various factors, including regulatory changes, market sentiment shifts, or the realization that the price of Bitcoin has become overinflated compared to its real-world utility.
It’s essential to note that the concept of a “bubble” and subsequent “bust” is not unique to Bitcoin, as it has been observed in various financial markets throughout history. Monitoring
Presently, the global crypto market cap of stands at $2.77 trillion, reflecting a change of 1.08% over the last 24 hours and 144.58% over the past year. The current BTC valuation stands at $1.36 Trillion, indicating a market share of 49.2%. On the other hand, Stablecoins have a market cap of $149 billion, or 5.39% of the total crypto market cap.
What causes a Bitcoin bubble?
1. Speculative trading: A significant factor contributing to a BTC bubble is speculative trading, where investors buy BTC primarily to sell it at a higher price in the future. This can create a self-fulfilling prophecy, as rising prices attract more investors hoping for quick profits, further driving up the price.
2. Media hype and public sentiment: Positive media coverage and widespread hype about the potential of Bitcoin can lead to a surge in demand, often surpassing its intrinsic value. This heightened sentiment can create a euphoric environment, fostering a rapid increase in prices disconnected from the underlying technology or use cases.
3. Limited supply and halving events: Bitcoin’s capped supply and periodic halving events, which reduce the rate at which new coins are mined, can contribute to scarcity-driven price increases.
These events often lead to a heightened sense of urgency among investors to acquire Bitcoin before the supply decreases, potentially inflating its value. The current BTC bull run can be traced to the incoming halving in April 2024.
4. Market manipulation: Malicious actors and coordinated groups can artificially inflate the price of Bitcoin through wash trading, pump-and-dump schemes, or spreading false information to create FOMO (Fear Of Missing Out) among inexperienced investors.
5. FOMO and herd mentality: The FOMO phenomenon can cause a surge in demand for Bitcoin as investors rush to buy in, driven by the fear of being left behind in an increasingly bullish market. This herd mentality can fuel unsustainable price increases.
6. Macroeconomic conditions: Economic factors such as low-interest rates, inflation concerns, or geopolitical instability can drive investors to seek alternative investments like Bitcoin, contributing to its price surge and potential bubble formation.