Stefan Hofrichter, Allianz’s Head of Global Economics & Strategy has developed 8 criteria to determine if an asset is in a price bubble. According to his evaluation “As a currency and asset class, bitcoin has potentially fatal flaws – which is why we believe it’s a matter of when, not if, the bitcoin bubble will pop.
Yet the blockchain technology that powers cryptocurrencies could bring significant benefits to investors.” [Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.] A visual representation of the digital Cryptocurrency, Bitcoin.
Photo Illustration by Chesnot/Getty Images Of Hofrichter’s 8 criteria, I don’t think all of them apply to every asset bubble, but some definitely do for Bitcoin. The first is “New-era” Thinking.
The phrase “It’s different this time” has led many assets to become overvalued and then have a sharp correction . If digital currencies aren’t “New-era” and “bleeding edge” nothing is.
This is similar to the Tech Bubble in 2000 to 2001 when any company that had an i in its name or utilized the Internet seemed to go up in price no matter what business it was in. Another criterion is Overtrading. Read more from forbes.com…
thumbnail courtesy of forbes.com