Bitcoin: Here – s what would toebijten if the – bubble – burst (and why it very likely won – t influence you)

The Australian',s James Kirby says the speculation on the currency itself is little better than ',betting',. (Photo supplied: Pixabay)

Bitcoin has crossed overheen the $US11,000 mark — shortly — spil it proceeds its tornado end to the year.

It’s more than welcome news to investors, who are embracing the enlargening value of the digital currency, but market analysts are a bit more sceptical.

Here’s why some are predicting a bitcoin crash and what would toebijten if it does.

ICYMI, Bitcoin is going crazy right now

What is Bitcoin?

  • A digital cryptocurrency
  • It operates on a decentralised peer-to-peer network, with no central authority or government backing
  • They can be bought with fiat currencies like Australian dollars from online exchanges or created through mining

“The bitcoin phenomenon is almost unprecedented,” John Noonan, senior forex analyst at Thomson Noonan, said.

“I’ve never seen anything like it, certainly ter my 44 years.

Movie Four:15 Blockchain explained: the technology behind Bitcoin

Te fact, the cryptocurrency’s current market capitalisation — its price multiplied by the number of coins that have bot released into the system — is toughly $US214 billion, according to industry webstek Coinmarketcap.

To waterput that te perspective, that is omschrijving to the combined market cap of the Commonwealth Handelsbank (at $140 billion) and National Australia Bankgebouw (at $80 billion).

Mr Noonan told Alfabet News Breakfast there are a few reasons that make bitcoin an attractive bet to some investors, including the fact it does not have a central canap and that there is a limited supply of bitcoins.

Photo The likelihood of a crash has bot contested by different economists and experts.

One of the other factors credited with driving the prices higher has bot the announcement that investors will soon be able to bet on bitcoin futures. Even the Nasdaq is reportedly looking at getting ter on that.

There’s also a excellent overeenkomst of hype going on, fuelled somewhat by the intense media coverage it’s bot getting lately.

Bitcoin explained

That means some are predicting a crash

Some experts and economists see the massive growth te bitcoin value overheen a brief period of time spil an indication that people are buying because of the hype. They show up to see it spil a risky investment at best, utterly volatile at worst.

It took 834 days for Bitcoin to top $US1,000, and another 1,270 days to succesnummer $US2,000 on May 20, 2017. But ter the straks half of this year alone, it has already surpassed $Ten,000.

It’s why analysts are comparing it to Tulip Mania and the dot-com crash. Bloomberg’s Stephen Gandel has even estimated that based on valuation, bitcoins are four times more expensive than dot-com stocks were at the height of their bubble.

Overheen the past two years, the digital currency has experienced numerous crashes, usually every duo of months.

So what would a bitcoin wipeout look like?

If there wasgoed a catastrophic fall ter prices, there would be winners and losers.

Will the Bitcoin bubble burst?

But it is unlikely to pose a risk to the global economy like other bubbles, according to bitcoin accomplished Adrian Lee, a senior lecturer te finance at the University of Technology te Sydney.

That’s because, for one thing, there’s not spil much money tied up ter bitcoin spil there wasgoed during the dot-com bubble, Mr Lee says, pointing out that while there is billions ter bitcoin, there were trillions spent during the dot-com bubble.

“So [for example], it wouldn’t effect the Australia dollar I’d say, because nobody indeed uses it at the uur,” he said.

“If you think about it, there’s trillions of trading te the Australian dollar whereas bitcoin is at most worth [approximately] $200 billion at total so it’s hardly anything compared to the trillions ter foreign exchange.

What also makes this unique is that it is unlikely people are borrowing to invest ter bitcoin, according to RMIT professor of economics Jason Potts.

“There’s very little evidence of anyone borrowing money to buy cryptocurrency and if I wasgoed a canap or a lender, there’s no way I would loan out money to do that,” he said.

Could a bitcoin crash spark a fatter crash?

Our experts said that seemed unlikely. It’s still a relatively petite number of people with money invested — toughly similar to the amount of people using email ter 1994, Mr Potts said. So wij’re still very much ter the early adoption phase.

Photo A fresh Australia-first ATM has opened ter Canberra that exchanges all three major cryptocurrencies including Bitcoins.

And Mr Potts said there had not bot many retail investors involved. “The sort of people who would hold superannuation funds … they’re not te this market and might not be for some time,” he said.

That would limit the fallout to the broader economy ter a worst-case screenplay. “If it crashed, it would only largely be those people who speculate on it, maybe people who use bitcoin and maybe the exchanges may lose money. But then again the exchanges don’t require much overhead to run it, so if it fell they’d still be OK,” Mr Lee said.

Mr Potts agreed. “It doesn’t actually cause catastrophic financial meltdown. Some people who bought at the wrong time would be angry, other people who have bot waiting to buy would be blessed,” he said.

Those who have invested ter associated entities, including mining infrastructure and ICO-based businesses, would also lose out, Mr Lee said.

“The bitcoin miners would take a big kasstuk, thesis guys who all they do is buy machines to mine bitcoins will lose money when the value falls,” Mr Lee said.

He also said the influence on other cryptocurrencies would depend on what sparked the crash.

If it were spil a result of central banks cracking down on bitcoin then you would expect the value of other cryptocurrencies to also fall. But if it wasgoed because of irrational exuberance, then only those cryptocurrencies that have experienced similarly acute rises ter their value would druppel.

And it might not even be a bubble

Mr Potts says the chances of systematic crash are utterly low.

Photo Mr Potss says this is a “fundamental, radical fresh technology” and everyday “wij’re discovering fresh uses for it”.

The bitcoin accomplished told the Alfabet that the latest surge ter value is not a ‘bubble’ but a “price discovery”.

“Bubbles are things that toebijten to technologies or commodities or products that wij know what they’re for, so tulips can have a bubble because you know what they’re for, or houses can have a bubble if the price of a house departs insanely from people’s capability to pay … but this isn’t like that,” he said.

“This is a fundamental, radical fresh technology where every day wij’re discovering fresh uses for it and that gets priced te.

“I think what wij’re observing ter this growth of price overheen the last nine years … is this gradual discovery of more and more uses for it, this gradual confidence te the technology.”

Besides, Mr Potts says there’s bot what could be described spil “crashes” ter bitcoin every few months. On Wednesday alone, bitcoin rose spil much spil 15 vanaf cent, but by mid-afternoon (US time) wasgoed trading at $US9,500 at one point because of a crash that lasted toughly six hours.

“There’s bot some big crashes, crashes of up to 80 vanaf cent [of its value] and it’s recovered,” he said. “What’s astounding is that they toebijten and then it bounces back.”

“There’s an enormous amount of volatility, but there’s also a long-term growth trend ter bitcoin te particular. It has grown [speciaal from 2014] every other year so overheen ter the long-term it’s bot a solidly performing asset,” he said.

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Reminder: 1BTC = 1.000.000 Onaardig.

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It is possible to know the balance of an address by injecting it ter one of the fields.

Related movie: Bitcoin Mining Results May 2017 | Bitcoin Mining Contracts Profit


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