🎈 [Analysis] Can bitcoin be both a bubble and bullish? – Tony Sheng

Bubbles are defined as overpriced markets that will eventually pop, correcting to its much lower deserved price. They can happen under a few scenarios:

• People make money and tell their friends
• People tell their friends
• The media tells the people
• A new era is declared
• Sentiment is overwhelmingly positive

Crashes then follow in a few scenarios:

• The positive feedback loop breaks
• People stop making money (this is why periodic corrections are good)
• We run out of people to tell
• Faith in the new era is lost
• The technology is proven to be fundamentally broken
• A new technology disrupts the current market
• Regulatory and other risk threaten the vision of the new era (includes theft, seizure, exchange closing, etc.)

Many people think that bubble pops are fatal. However, as the Dotcom bubble shows, a popped bubble isn’t always fatal. In fact, even if the bubble pops today and the market crashes, we may see it recover to the same, and if history is any indication, higher, levels. So yes, we’re in a bubble, but there’s no alternative. Speculative bubbles fuel innovation but bubbles are not fatally risky. Even if the bubble bursts, if you zoom out, there’s still a good chance we end up on the moon.