Bitcoin Bubble Now Bursting According To Economists
It appears that the day every Bitcoin investor dreads has finally arrived as economists warn that the cryptocurrency bubble is bursting and it has a long way to go. Many are now selling off their vast digital fortunes in favor of more traditional investments like precious metals.
Long before the cryptocurrency's price began to lose its value, many financial experts were already echoing dire warnings that it has all the hallmarks of a classic speculative bubble. Nevertheless, as prices continued to surge many people placed their financial future on the line for a chance to strike it rich in this 21st Century gold rush.
However, as governments all over the world begin cracking down on Bitcoin and other cryotocurrencies, their value began to decline. The recent announcement made South Korea's government ban digital currency exchanges in the country, caused massive sell-offs that rocked the market to its core, losing $200 billion off its market capitalization over the course of a few days.
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Despite this, however, many cryptocurrency advocates still hold on to the idea that digital currencies can be a viable replacement to fiat currencies. This is something Capital Economics dismissed saying that claims Bitcoin and its imitators could replace established currencies as "rubbish."
"Most people are buying Bitcoin, not because of a belief in its future as a global currency, but because they expect it to rise in value," Capital's research note said. "Accordingly, it has all the hallmarks of a classic speculative bubble, which we expect to burst. Triggers for the bubble to burst could be a further crackdown by regulators or a major hacking attempt."
As such, many of the nouveau riche are turning to gold and other precious commodities to shield their newfound wealth. A report from Bloomberg revealed that many investors, many of whom began accumulating Bitcoin back when it was still trading a $1, are frequenting gold exchanges.
"We're seeing trades north of a million pounds every couple of weeks," said gold dealer Ross Norman from his shop in St James's St. "It's been a welcome addition to our business in a period when physical demand from more traditional sources has been subdued."
But while Bitcoin might be going down, the technology behind it will have lasting impact. Many companies are now exploring blockchain technology and are finding new and innovative ways of using it to do business. This is something Capital Economics acknowledges who believe that its use can go far beyond transforming the financial system.
