Vikram wrote the book Boombustology on how to spot financial bubbles using five criteria, which are:
1. Are prices tending away from equilibrium?
He gives Bitcoin a half-check.
2. Is significant leverage supporting lofty prices?
Given the general absence of leverage in Bitcoin trading, no check here.
3. Is there a vibe of overconfidence, a belief that “this will change everything”?
He gives Bitcoin a clear check.
4. Are regulations or government intervention supporting prices?
Nope. If anything, governments like China are restraining Bitcoin’s price growth. No check.
5. Is the market of new users and potential investors saturated?
Not even close. Bitcoin still has plenty of room to grow. No check.
So according to Vikram’s framework, the current Bitcoin price rise gets a total of 1.5 checks. His verdict? Not a bubble.
So on my five point scale, with five being a “virtually certain bubble likely to burst imminently,” bitcoin only registers one and half points. On the margin, this means that the stage may be set for it to become a bubble, but it doesn’t appear to be one yet.
Sounds like hedging to me 😉
Full article here.