The asset bubble refers to the financial asset or commodity market price is much higher than the actual price and intrinsic value, resulting in a false market prosperity. A review of the history of mankind, there have been a total of four large scale asset bubble event. Digital encryption currency’s recent performance continuously refresh year minimum, to some extent reflects the application of defects exist in the real world. 2017, Kenneth Rogoff and Robert Schiller, American economist once wrote “Crypto-Fool s Gold” respectively? “And” What is Bitcoin Really Worth Don t Even? “Ask”, as a digital encryption currency triggered speculation enthusiasm has far more than its actual application, it is like the past market bubble.
The daily planet Odaily Institute of collation and analysis of the common law of the asset bubble, and compared the bitcoin prices, found that these curves have many similarities.
The five major asset bubble
In 1634 -1637, Holland “tulip bubble” (The Tulip Bubble)
In 1630s, Holland produced “tulip bubble”. Due to the scarcity of tulips was regarded as a symbol of wealth and honor, which led to a large number of market speculation, thus pushing up the market price of tulip. From November 1636 to February 1637, the tulip prices rose more than 20 times. The peak in prices, a tulip price and a house price can be equated. But from the beginning of February 4, 1637, the market suddenly collapsed within six weeks, the tulip prices fell by an average of 90%.
In 1719, the French “Mississippi bubble” (The Mississippi Bubble)
Unlike the Holland folk “tulip bubble”, “Mississippi French stock market bubble” has a “official background”. In eighteenth Century, the government to solve the debt crisis, the French monetary theorist Jejohn Law (John Law) proposed the money supply plan, that is to set up a bank to issue currency, and by the Mississippi Company to ensure bank credit, and Mississippi Company in the American colonies of gold do guarantee and mortgage. In exchange, the French government promised the Mississippi Company in the monopoly of the American colonies in 25 years. Under this background, the Mississippi Company’s share price by 500 livres rose to 15000 livres, rose more than 20 times. But due to serious excess money, plus the pass from Luis Anna S found no gold news, public confidence was shaken, the shares of the Mississippi Company and falling to 500 livres, fell more than 95%.
Source: the sun Xiaoji, “to the poor: the South China Sea in 1720 financial bubble”
In 1720, the British “South Sea bubble” (The South Sea Bubble)
The “South Sea bubble” and “Mississippi bubble” is exactly the same. South Sea Co was founded in 1711, is the commitment of the government monopoly of all the British government and the Spanish colonies in South America trading. Market rumors the company found a lot of wealth in South America, investors believe that the South Sea Co will reproduce the East India Company’s brilliant, so a lot of panic buying shares of South Sea Co, the company’s share price soared more than eight times, from 129 in February 1720 rose to 890 pounds in June, but then it burst, investors boom decline, stock market crash, the South China Sea shares fell. In November plunged to 135 pounds, causing serious economic crisis.
20 in the 20 century, the Great Depression of the United States
When the American economy developed rapidly, the share of World Trade and capital output ranked the forefront of the world. But hidden behind the prosperity, many potential crises, such as the social gap between rich and poor market led to a serious imbalance between supply and demand. In the drive of false prosperity, the lack of supervision of the bank to encourage people to advance consumption, financial market is the emergence of a large number of real estate mortgage to buy stock speculation, stock prices have soared, with several times to buy in the actual price out of stock market overheating phenomenon, internal bank non-performing assets are accumulated. In October 24, 1929, lasted for 18 months of the bull market Wall Street stock market crash, the stock plummeted.
In 1980s, the Japanese financial bubble
1986, to stimulate the national economic growth, the Japanese government launched a loose monetary policy and fiscal policy, indirectly led to the emergence of a large number of market speculation. The Japanese stock market and city land value from 1985 to 1989 rose 3 times. 1989 years 12 months 29 days, Japan’s economic indicators have reached the highest level ever, the average price reached the highest point of 38957.44. But can not be in the asset price industry support, the Japanese economy began to decline. Market speculators enthusiasm, stock and land prices continue to decline, the bubble began to burst. 3 1992, the average price fell below 2 million, reached only half 1989 year, the highest point of the 8 month, fell further to around 14000. The company registered capital of large losses, serious liabilities. With the end of Japan easing, to maintain the Japanese stock and land prices do not exist.
Asset bubbles exist
Asset bubbles can be understood as rising asset prices in a continuous process, this kind of price rise makes people have a further price rise is expected, and continue to attract new buyers admission, with rising and speculative capital prices continued to increase, the asset price is much higher than the corresponding real price and the true value of new buyers began to examine the assets, is expected to be reversed, outflow of funds to start, buy orders reduced, asset prices began falling, the mood of the market panic, sellers continue to sell assets in the hands, to avoid the loss continues to expand, asset prices plummeted and the asset bubble burst.
The history of economics expert Charles Kindleberger (Charles Kndleberger) on the “greater fool theory”: as long as you can find willing to take the disk greater fool, asset bubbles can be blown.
Digital encryption currency is not a bubble?
From the price and volatility, bitcoin has bubble irrational expectations. In fact, bitcoin history occurred two times greater crash, respectively:
Is the first time in 2011, from $0.3 to $312 in June, rose more than 105 times. But the next few months, bitcoin prices continue to decline, 11 month fell to $2, down 94%.
The two is at the end of 2013, a single bitcoin price topped $1147, but then 2014 years all the way down to the beginning of 2015, only 220 odd dollars, fell 354%.
11 2018 month 19 day, bitcoin has continued to decline, from $5600 to $3500 continuously, down to 38%, refresh the lowest point of the year. Compared with December 18, 2017, bitcoin prices hit a record peak of $18674, less than a year bitcoin fell more than 81%.
The industry believes that the reason is the decline in many aspects, the first is the United States SEC regulatory pressure, increase the illegal ICO punishment has played an important role. Secondly, the BCH bifurcation for BCHABC and BCHSV, causing some confusion to the market. At the same time, because of the block chain technology is still in the early stages of development, supporting digital encryption application scenarios using restricted currency. In addition, central banks are actively promoting the development of legal digital currency, bitcoin may not be conducive to the development of non government digital encryption currency.
Interestingly, bitcoin is a continuation of the history of several major asset price bubbles curve .
The mainstream economists, financial experts, politicians think bitcoin speculative bubble obvious. According to Convoy Investments of American investment data, bitcoin rose more than 64 times over the past three years, far more than in seventeenth Century three years of tulip mania or 50 times, may become one of the largest in the history of mankind a speculative bubble. The Nobel prize winner Robert Schiller, an economics professor at the Yale University in 2017 had pointed out that the digital encryption currency is an obvious asset bubble. Nobel laureate Paul Krugman also wrote in the 2018 “New York Times” column, and other digital currency bitcoin represents 300 years of economic recession. Warren Buffett has repeatedly expressed a negative attitude to the encryption of currency, he believes that encryption is not a kind of value creation of monetary assets.
Bitcoin is not an asset bubble? The industry did not reach a unified consensus. If it is, when it burst? Can make nothing of it。 But it is under the influence of various factors, the future of bitcoin may still be phased panic selling.
1. Xie Ping, Zou Chuanwei, Liu Haier, “Internet Financial Handbook”, Renmin University of China Press published in April 2014.
Mason 2. of Harvard scholar Zou Chuanwei 9 is an economics problem: digital encryption currency and block chain finance
3. Valley in full, “and” beyond Japan’s economic development, Jiangsu people press. 2016 4.
4.Rogoff, Kenneth, 2017, “Crypto-Fool” s Gold? “, Project Syndicate, Oct. 9, 2017.
5.Schiller, Robert, 2017, “What is Bitcoin Really Worth Don t Even?” Ask “, New York Times, Dec. 15, 2017.