According to Investopedia, a bubble is “an economic cycle characterized by rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive selloff occurs, causing the bubble to deflate.”
According to Wikipedia, a bubble is defined as “trade in an asset at a price or price range that strongly exceeds the asset’s intrinsic value.”
If the current hype surrounding Bitcoin does not meet the definition of a bubble, then nothing will.
The cryptocurrency recently traded for over $8000, as buyers continue to jump into an uncertain market under the assumption that prices will simply continue to rise. That is also another major characteristic of “bubble market” behavior-rampant speculation on higher prices.
At some point, the cryptocurrency bubble will pop, the only question is who will be the last person to buy.
Investing legend Jim Rogers was recently quoted by Marketwatch.com discussing his views on several markets, Bitcoin included. Rogers was quoted as saying “It looks and smells like all the bubbles I have seen throughout history.”
Another major distinction between lasting value and a bubble is the motivation for purchase. An asset that is in a bubble will typically be purchased only for the potential of price appreciation, whereas a lasting asset will be purchased as a store of value. This represents one of the major differences between gold and Bitcoin.
Bitcoin has only been around about a decade now, and its potential for mainstream use remains very questionable. Not only that, but the network also has yet to prove that it is as secure as many are led to believe. Gold, on the other hand, has been considered a reliable store of wealth and value for thousands of years. It can be used as a medium of exchange anywhere in the world, and has potential benefits that go far above and beyond the potential for higher prices.
If you are considering investing in Bitcoin right now, ask yourself this question: Is this investment for any other purpose than the possibility of selling bitcoins at a profit?
If the answer to that is no, you may want to consider other alternatives like physical gold. This key asset class not only has tremendous potential for higher prices, but may carry a number of other benefits as well. Gold may potentially hedge a number of economic issues such as inflation, deflation or weaker fiat currency values. It can be used for exchange or barter anywhere on the globe, and has a long, reliable history as a store of value.
You make the choice.
Adding physical gold to your holdings has never been easier than it is today. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our account executives are here to answer any questions you may have, and can even show you how to buy and hold real, physical gold using your IRA account.
Let other investors deal with the fallout from the latest bubble. Explore your options for a reliable store of value today. Call Advantage Gold at 1-800-341-8584 to learn more.Tags: advantage gold, bitcoin, bubble, cyrtocurrency, gold, intrinsic value, jim rogers, selloff