The word "bubble" is sufficient to drive crypto investors into an anxiety attack and have them wake up at 4am to view their portfolios. It doesn't help their cause to hear public figures like Warren Buffet and Jamie Dimon callout the Bitcoin bubble and state that Bitcoin has no valuation mechanism because it does not provide a tangible utility apart from its existence! And by existence, they mean an address and a secret key - not much value there. So where exactly is this Bitcoin and crypto bubble headed? According to me, it has only just begun its upward journey.
If we really think about it, Bitcoin indeed does not provide a true utility apart from storing the number of coins that you own. At a price of over $15k and transaction fees at 0.001, that is quite expensive when we can transfer domestic fiat currencies for free. Bitcoin features are now provided by many other cryptocurrencies. However, the world is just catching up on Bitcoin and it is the first investment a small investor is likely to make when they start dabbling with
cryptocurrencies. Bitcoin has become the Central Index of the crypto world. Most bubbles in stock markets, real estate, commodities, etc. form relatively quicker because they are localized. This means that a smaller population of investors have the ability to invest in an idea. When a stock or real estate market starts booming, many new investors join in with a fear of missing out (FOMO). This continues until majority of the population joins in, or there is some economic or political development that influences the population to start dropping the investment. At this point, the initial investors (sometimes called whales) withdraw their investment leaving the remaining 90% of FOMO investors to bear the losses from their investments.
What's different about Bitcoin and cryptocurrencies today is that this bubble is on a global scale accessible to small, medium and large investors. No other investment today has the ability to provide a common asset like cryptocurrencies to a global audience. Imagine hundreds of millions of small retail investors joining either after a detailed study of cryptos, or just to avoid missing out on the gains and deciding to purchase 0.001 bitcoin. These investors are likely to hold onto their small investment over a period of time and since Bitcoin has a maximum long term circulation of 21 million coins, this demand is likely to take the price to levels we cannot even imagine. Existing investors are also unlikely to dump Bitcoin because it seems to bounce back up at every decline. This is a perfect example of investors waiting to buy Bitcoin at every dip.
When Bitcoin keeps rising over the long term and the supply is limited, the alternate app coins are likely to see significant gains. Since there are thousands of alt coins, there will be a few winners who manage to create true utility and win over the long term. There are several other alt coins that will go through a pump-and-dump phase, so it is important to invest in app coins that you truly believe in for its long term utility.
Suffice to say that while the price of Bitcoin at $16k may seem like it is too high, there has never been an asset available for the world to invest in relatively easily. Calling it a "bubble" would be inaccurate unless there is a previous occurrence to compare it with (Tulips are not counted!).