If you’re new to 5 Minute Finance, we’d suggest you read these threearticles first (if you’ve got the time). It will help what comes next make a lot more sense
The Netherlands, in the early 1600’s was the setting for what is commonly agreed as the very first speculative bubble. The details of which should really blow your mind. Back then, a new product was imported into Holland, one the Dutch had never seen before. It was different, it was beautiful and it very quickly became the must have item of the rich and famous. As demand for this thing increased, so too did its price. Noticing the price going up, “investors” started buying it too, in the hope of being able to sell it later at a profit. And with more demand came increased prices and with increased prices came increased demand. And so it continued and soon enough buyers were forking over the equivalent of ten times the YEARLY salary of a Dutchman for a single one of these things. The item of course was a Tulip Bulb. True story. The hype and speculation got so out of control, that a single tulip bulb was trading at 10 times the wage of the average person. Crazy stuff. On a completely unrelated note, back to Bitcoin….
Where we have gotten so far on Bitcoin
So over the last few days we’ve talked about why currency has value (see here), the technology behind Bitcoin (see here) and who the major users of Bitcoin are (see here). Today we’ll talk about why we think Bitcoin is a massive bubble waiting to burst. But first it’s really important that we say the following:
No one knows anything for certain in finance. Investing is gambling. Educated gambling, but it’s gambling nonetheless. Never, ever, listen to anyone who tells you that something is definitely going up, or definitely going down, as they cannot know it with 100% certainty. A key motivator of us writing The Daily, is that the Finance industry is filled with so many pariahs who prey on the the ill-informed and make money for no none but themselves. The purpose of The Daily is to shed some light on all things financial, to help you understand better what is going on, and to make better decisions yourself. We are not telling you what to or not to invest in, but we will tell you our opinions. And they could very easily be wrong.
On Bitcoin. We think the technology behind it is incredible. Game changing in fact. If you’re interested in how it can be applied in really clever ways, read this article by The Huffington Post. Bitcoin however and all of the other copycat cryptocurrencies which have crept up over the last year, will most likely fall by the wayside. And tomorrow, we’ll tell you why we think so.
For now, here’s an article, which quotes Jamie Dimon who heads up the largest bank in the United States. (read this)
For now that’s 5 minutes. Hope it helped