On the evening of the 17th, Beijing time, Bloomberg reported that recent volatility in Bitcoin has raised a sense of urgency among market observers, bringing back concerns that have lingered for most of the past year: is Bitcoin just another bubble, like the tulip mania or the dot-com boom? The previous surge in Bitcoin—falling 48% from its peak on December 18—has given investors good reason to be cautious. Over the past three years, Bitcoin has surged nearly 60 times, an astonishing rise that dwarfs even the Nasdaq’s gains during the 1990s tech boom. Looking further back in history, Bitcoin has surpassed the Mississippi and South Sea bubbles of the 18th century, as well as the Dutch tulip mania of the 1630s. Given the limited value of tulips at the time, some draw comparisons between the two. (The chart only shows the price of one type of tulip; there is no data after the peak.)
Proponents of Bitcoin argue that its current growth phase is far from over. They claim that analyzing the market isn’t just about tracking price movements. Even though recent drops have caused concern, Bitcoin has repeatedly bounced back from more than a 50% decline. If Bitcoin eventually becomes a widely accepted form of digital gold, as Cameron Winklevoss believes, it could still have significant upside potential.
According to a report, hedge funds that fueled the cryptocurrency boom recorded returns exceeding 1,000% last year. While there are multiple ways to interpret these gains, Bitcoin’s three-year increase has been slower compared to the greatest financial bubbles in history, including the Mississippi and South Sea bubbles. However, many remain skeptical. Howard Ang from Convoy Investments LLC and Jeremy Grantham from GMO LLC have analyzed Bitcoin’s rise against historical bubbles and believe it is not sustainable.
Grantham, who serves as Chief Investment Strategist at GMO and manages around $74 billion in assets, expressed his concerns in a letter to investors on January 3. He stated, “There is no clear fundamental value, the market is largely unregulated, and there's an exaggerated narrative—this is exactly what we've seen in historical bubbles.†Despite his track record, Grantham’s warnings haven't always been perfectly timed. Although he correctly identified the dot-com bubble in the 1990s, he exited too early and missed out on some of the biggest gains.
Only time will tell whether Grantham and other skeptics are right about Bitcoin, or if it's too early to judge. As the market continues to evolve, the debate over whether Bitcoin is a revolutionary asset or a dangerous bubble remains ongoing.
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