Those who compare Bitcoin to the great bubbles of the past need to check the historical books. This moment is very different.
While bubbles of the past explode only to later collapse and never to return to their previous glory, bitcoin is known for its “two-steps-forward-one-step-back” moves. If I plot its latest seven-month explosion from around $10,000 to over $50,000 against the relevant time period for the South Sea Company’s stock in 1719-1720, we realize what the bitcoin skeptics think they see – an unsustainable bubble waiting to deflate.
But they shouldn’t be too hasty. Bitcoin of 2021 doesn’t have an entrenched political elite trying to consolidate and make manageable a bloated government debt. If anything, Bitcoin is fighting elites that are trying to oppose it and denounce it every step of the way. While exchanges have been hacked and privacy details leaked, bitcoin insiders haven’t unscrupulously bribed half the House of Commons with assets sold at below market-price. Bitcoin insiders haven’t – as far as we know – assuaged government officials by giving them fictitious bitcoin in exchange for favorable legislation. This all happened during South Sea mania.
Political insiders haven’t passed a “Bubble Act” to ban the issuance of other competing schemes to funnel market demand to their preferred asset. Spot trading of bitcoin hasn’t been paused for two months at the height of a price boom to process a dividend the SSC directors haphazardly arranged so a semblance of fundamental value could be had.
