Is Bitcoin (available on Coinbase) (BTC) a real asset or bubble? This question is a continuous discussion. Economists and market pundits have been closely watching Bitcoin (available on Coinbase) mania; some of them are comparing it to teh Dutch Golden Age Tulip Mania, while a few are showing confidence in its future fundamentals.
The debate over the shocking Bitcoin (available on Coinbase) price movement and its ability to exist for the long-term hasn’t settled up. Until now.
Joost van der Burgt, policy advisor at Federal Reserve Bank of San Francisco, however, believes that Bitcoin (available on Coinbase) is a bubble which is close to bursting. The advisor has explicitly explained his thesis using five key indicators:
Displacement
Boom
Euphoria
Profit-taking
Panic
The market has already crossed the first three stages of the cycle as the economist thinks the Bitcoin (available on Coinbase) bubble is currently in the fourth stage of the cycle.
He claims the displacement stage started occurring during the early age of Bitcoin (available on Coinbase) – which then changed into the boom phase last year. Explaining the boom period, he said, “The ‘boom’ phase is characterized by prices rising slowly at first, but then gaining momentum as more and more participants enter the market, fearful of missing out.”
The advisor further believes that the rush of entering the market has forced traders to borrow money to finance their investments. He calls it “Euphoria” (stage three of the cycle) – which he believes occurred togETHer with the boom stage.
Now at the Profit- Taking Stage
The market has already entered the profit-taking stage according to Joost van der Burgt. He says the massive selloff in Bitcoin (available on Coinbase) price indicates that investors are capitalizing on gains that Bitcoin (available on Coinbase) generated during the last year.
Bitcoin (available on Coinbase) price is down almost 60% from the all-time high amid traders selling strategy. He further predicts that the market is likely to enter the final stage soon; saying “The subsequent ‘panic’ phase, should it come to that, commences when reality sets in and Bitcoin (available on Coinbase)’s price would substantially crash.”