This past November, however, investor behavior — in addition to the pure cash value of the bitcoin — appeared to challenge those notions for good. Near the end of November, hours after bitcoin surpassed its landmark value of $10,000, it easily passed $11,000. And in December alone, the cryptocurrency has continued to surpass expectations of its volatility, for which economists and investors alike have said it will be a big challenge for bitcoin to prove the inflated rise isn’t simply going to result in a hard crash and fall.

Could the investing frenzy be indicative of, for example, the burst of the dot-com bubble in the late ’90s or the run up of the stock market just before the 1929 crash?

The answer is a qualified yes. While history does not predict the future, bitcoin is now officially the biggest financial bubble in world history, surpassing the infamous episode of tulip mania in Holland in the early 1600s — when the price of a single flower exceeded the average annual income for skilled workers.

This does not bode well for the long-term value of bitcoin.

One significant problem people have been wary of is bitcoin’s method of recording transactions. To track every single transaction without going through an existing financial institution (such as a bank or government fund), bitcoin charges a high transactional fee and takes a number of days to process a request that should be — in theory — instant in nature.

Another notable issue is that rising transaction costs could cause a spike and subsequent fall in the existing value of bitcoin. The currency is in an incredibly volatile state and has yet to prove that the costs will outweigh the eventual downfall of such an inflated good.

And, of course, there’s still the possibility (inevitability?) that a smart hacker somewhere will figure out how to counterfeit an unlimited supply of bitcoins. If that happens, then it’s all over. In fact, there are numerous news reports pointing to bitcoin as a major target of North Korean hackers.

So, will the bitcoin bubble burst? Some would say it’s not a matter of if it will burst but when. Where will your money be when the smoke clears?

By Peter Economy
The Leadership Guy