When I recorded the latest episode of my Economics Explored podcast last Friday afternoon, the price of one Bitcoin was a bit above US$18,000 after having failed to get beyond US$20,000 in the previous weeks. In my chat with my friend Tim Hughes, I said who knew what it would end up at when the episode was finally released. Well, it turns out that the price of one Bitcoin has finally gone beyond US$20,000 (check out this Coindesk report).
The US$20,000 Bitcoin price is the latest illustration of the Greater Fool Theory. If you’re buying Bitcoin at this price you’re speculating/gambling you’ll find a greater fool who’ll buy it at a higher price. Coindesk suggests there could be a lot of greater fools out there:
Breaking above $20,000, which represented a significant hurdle in the mindset of most traders, is entirely new ground for bitcoin and opens the doors for a climb to $100,000 over the course of 2021, according to some.
As I discussed with Tim, and in my post from Saturday, Huge swings in Bitcoin value make it hard to believe it will ever replace traditional currencies, I’m very sceptical about the value of Bitcoin. But, hey, it’s 2020, and Bitcoin’s insane valuation is just another marker of this extraordinary year.
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Gene, your comment:
” I’m very sceptical about the value of Bitcoin. But, hey, it’s 2020, and Bitcoin’s insane valuation is just another marker of this extraordinary year.”
I am with you on this. Your previous article was about the way we (most of us) have bent over and taken it when our masters tell us what to do regarding Covid. I find it difficult to understand why we have let our basic rights be trampled so easily. No, do nothing was not an option and it was going to take a lot of restrictions but quite a few make no sense. Curfews in Melbourne and no outside for people at times even though outside is a better place to be re Covid. Police arresting people for Facebook posts. Lock down borders when the probability risk of contraction due to negligible numbers is extremely low.
The stock market in general is defying gravity and tech stocks in particular that will never see a return on the current market valuations. Tesla is the epitome of this. Bitcoin has always been a joke as far as I was concerned but again I am proved wrong….maybe. Whilst gold is not that far removed from bitcoin as a store of value at least you can hold it when the power goes down, it is not limited and in theory it is the only true currency along with silver.
Bring on 2021 and let’s see what new insanity that holds.