Extremely fast growth in the price of cryptocurrency fluids in 2017. has led many to declare bubble technology and vowed it to failure. But it seems more logical to be afraid of the excessive inflation of stock and property prices than with Bitcoin.
Easy money
Since 2008 new record values from a variety of assets are constantly being recorded.
Following the bankruptcy of Lehman Brothers and the ensuing financial collapse, central banks around the world turned to monetary policies that led to unlimited printing of fine money. The highlight of this was the fact that the financial system was "stuck" and should be "crushed" by the introduction of fresh money in circulation.
"The central bank's easy money policy supported asset prices by protecting the people they invested from losing their entire financial position."
Financial markets therefore felt secure. Whatever happens, this monetary policy will continue until central banks are confident that a second recession is not on its way. And although the excessive injection of money into the system is already over, it will take a long while for this extra liquidity to be "sucked out" by the market.
Shares and real estate
The fact is that analyzing the price of cryptocurrencys is quite difficult as there are no methodologies or fundamentals on which analysts base their forecasts. On the other hand, stocks and real estate are much easier to evaluate. On average, property prices are projected to rise at the speed of GDP growth of the economy, and the value of a company is determined primarily by its profits.
The basics
However, in recent years we have seen that this "fundamental link" is increasingly breaking.
"Stock exchanges as well as real estate prices constantly record records and seem to be not related to the performance of the economy."
Analysts say bubble in real estate prices in cities such as Toronto and London since 2014, and since then their values have doubled.
Progressive phase
The cryptobultures are only in the beginning phase, and the oldest of them, Bitkine, has been in existence for less than 10 years. It is logical to expect that investing in emerging companies and technologies can bring big profits, coming and at high risk.
Cryptocurrency are no different. Those who have felt in time and bought a battleship when it cost pennies are now millionaires. And just because the return is good does not mean that a bubble is formed. On the contrary. This may actually signal that technology behind the "asset" is becoming increasingly validated and accepted, while risks are diminishing. Even after the rapid rise in price, the entire market capitalization of all cryptocurrency is significantly smaller than that of stocks, bonds and real estate. Only Apple is 5 times bigger.
The effect of popping the balloon
"Despite the rapid growth in price, Bitkine has attracted quite a few new investors to the cryptolight. But it is unlikely that anyone (excluding the go-to gamblers) will bet all their fortune. "
This contrasts with the situation in the stock markets, where people invest a huge amount of their savings from their early years. They have learned that the best investment in the long run is the diversified portfolio. And the same people see the purchase of real estate as an investment that they can pass on to the next generations.
So a collapse in any of these markets has the potential to destroy all the savings of many people, and the effect on the economy will be serious. On the other hand, if something happens to the crypto-clay market, then no government will need to intervene, as the average investor has not put all their savings into them because of the still risky nature. So what should we worry about?
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