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‘Bubbles’ or bumps in the road?

‘Bubbles’ or bumps in the road?


Perhaps we need to start thinking differently about bitcoin’s market movements.


2017 saw a speculative bubble for bitcoin. The price soared over 100x from its lows at the end of the last cycle, when it fell to $155 in January 2015. 2017 alone saw a 2,000% rise to $20,000. And it was a bubble. Everyone said so, and even if they didn’t grasp it at the time, it has become painfully evident over the course of 2018. The price now stands at $3,400 – down over 80% but still up 340% on the start of 2017.


It has been a lot like the 2013 bubble, say those who have been in bitcoin for years, when BTC rocketed over 1,100%, from $100 at the start of October to around $1,200 at the end of November – followed by a painful bear market of over a year.


In fact, they say, bitcoin has bubbled many times. There was the bubble of April 2013, which saw bitcoin spike to $266 before rapidly deflating back to $60 by July – followed, of course, by the massive winter bubble. Then there was the 2011 bubble, which saw the price rise from around $1 in April to $32 in June, retracing to $2 by the end of the year. For the real old timers, there was a bubble that resulted from bitcoin starting trading on the open market in July 2010; some publicity from Slashdot saw the price shift from $0.008 to $0.08, before settling to $0.06.


Overlaid on this, we have bitcoin’s halving schedule, which apparently drives some speculative and fundamental activity – as you would expect from a marked drop in supply. Analysts have noted that bitcoin’s price has began moving upwards about a year before the peak of both of the last two bubbles.


Not all bubbles are equal

However, we have to distinguish between a ‘bubble’ and something rather different. Some of bitcoin’s ‘bubbles’ have retraced almost entirely; others have barely retraced at all; a couple have ended with significant growth measured from the start of the bubble, let alone the low from the last cycle. This isn’t a precise science, but we can offer these thoughts:

  • 2010 was simply price discovery. BTC stabilised not far from its peak
  • 2011 was a blip. Price retraced almost fully.
  • April 2013 was a blip. Price retraced almost fully.
  • November 2013 can be considered a conventional bubble, but would be better characterised as an overheated phase of exponential growth on the back of greater awareness.
  • The same is true for 2017.


In short, ‘bubble’ is not a helpful term for bitcoin’s growth curve, and misses even the medium-term picture of what’s going on here: exponential growth with a few speed bumps along the way.

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