Mainstream financial analysts are not yet done with the ‘Bitcoin is a bubble’ narrative to label the cryptocurrencies as a fad. Over the years, BTC skeptics have shown disdain for Bitcoin’s ability to power financial services and replace traditional currencies effectively. Even though a complete crypto takeover of the financial industry won’t happen any time soon, cryptocurrencies have indeed shifted the goalposts.
In the latest research, Man Group, a globally renowned hedge fund, referred to Bitcoin as the ‘Prometheus’ of Greek mythology. The report says that a new Bitcoin bubble replaces the prior one every time a bubble bursts. This phenomenon is different from what is classically classified as a bubble asset. Unlike financial tragedies of the past, Bitcoin is behaving differently on a fundamental level.
Massive volatility indicates financial prowess of BTC
The Man Group analysis notes that the high volatility of Bitcoin can be attributed to the price-discovery phase. Here, the asset goes under massive volatile movement as part of its financial stabilization and acceptance phase.
Whether or not Bitcoin is a bubble seems more complicated after the Man Group’s analysis. Many skeptics have written off BTC over the years after claiming it to be just another financial bubble featuring an inflated asset. Admittedly, the same can seem right if one considers the massive price movements, volatility, volume mismatches, FOMO, and real-world implications. Historically, the price does seem inflated at times.
However, several analysts have also shared their views about how the price is well below its actual value. The fair price is far higher compared to today’s trading price. Man Group’s report also reflects a similar sentiment and states that the ‘Bitcoin is a bubble’ statement is bordering on hoax. BTC does not resemble a typical bubble.
Man Group disagrees with Bitcoin is a bubble narrative
Cryptocurrencies are highly speculative instruments despite all the regulations worldwide. Bubbles are known to follow a ‘pump and dump’ pattern. Even well-established assets like gold and oil may display ‘pump and dump’ characteristics. But mature assets tend to survive multiple cycles of boom and doom to emerge as a wealth creator. Also, volatility may peak at the time only to remain stagnant for an extended period.
From the Dutch Tulip frenzy of the 1600s to the sub-prime housing market crash of 2008, bubbles have always displayed hyper-inflation characteristics. As per Man Group, the ‘Bitcoin is a bubble’ statement cannot be applied since BTC has survived five massive downturns (and many smaller ones) in its 12 years of existence. BTC has gone beyond surviving and touched fresh new highs indicating investor confidence. No wonder BTC is the Prometheus of Greek mythology.