For those who think BTC/cryptocurrency is dead...

Alright, figured I'd post this to try and help provide a bit of context to the people always asking if Bitcoin and/or cryptocurrency is dead or dying, and perhaps even prevent some of you from making a really costly investment mistake somewhere down the line.

First, take a quick look at these chart thumbnails...




Notice any similarities between them?

They are, in no particular order:

• Bitcoin, 2013-2014
  
• Bitcoin, 2017-2018
  
• Intel Corporation, dot-com era
  
• Cisco Systems, dot-com era
  
• S&P 500 Information Technology Index (the top 500 IT companies listed on NYSE/NASDAQ), dot-com era
  

Now, armed with that info, are you able to figure out which one is which?

In the spoilers below, you'll find the answers along with expanded versions of each the 5 charts.

CHART #1:



CHART #2:



CHART #3:



CHART #4:



CHART #5:



BONUS CHART (#6):






So, if you haven't figured it out yet, what I'm actually trying to teach you is what the anatomy of a bubble is...


WHAT IS A 'BUBBLE'?

A bubble is an economic cycle characterized by the rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive sell-off occurs, causing the bubble to deflate.

BREAKING DOWN A 'BUBBLE'

Bubbles form in economies, securities, stock markets and business sectors because of a change in investor behavior. This can be a real change as seen in the bubble economy of Japan in the 1980s when banks were partially deregulated, or a paradigm shift which took place during the dot-com boom in the late 1990s and early 2000s. During the boom, people bought tech stocks at high prices, believing they could sell them at a higher price until confidence was lost and a large market correction, or crash, occurred. Bubbles in equities markets and economies cause resources to be transferred to areas of rapid growth. At the end of a bubble, resources are moved again, causing prices to deflate.

THE FIVE STAGES OF A 'BUBBLE'

1. Displacement: This stage takes place when investors start to notice a new paradigm, like a new product or technology, or historically low interest rates basically anything that gets their attention.
   
2. Boom: Prices start to rise at first, then get momentum as more investors enter the market. This sets up the stage for the boom. There is an overall sense of failing to jump in, causing even more people to start buying assets.
   
3. Euphoria: When euphoria hits and asset prices skyrocket, caution is thrown out the window.
   
4. Profit taking: Figuring out when the bubble will burst isnt easy; once a bubble has burst, it will not inflate again. But anyone who looks at the warning signs will make money by selling off positions.
   
5. Panic: Asset prices change course and drop as quickly as they rose. Investors and others want to liquidate them at any price. Asset prices decline as supply outshines demand.
   

(Definition source: Investopedia.)


Sound familiar yet?

Basically, what's happening with cryptocurrency right now is completely normal and expected. Had the pricecontinued to rise, it would've just been a larger bubble that would've popped that much more dramatically.Experienced investors warned everyone that this exact thing was going to happen, yet people chose not to listen because they thought they knew better, because "Bitcoin is different", because "this uses the blockchain", because it's disrupting the entire concept of money, because everyone's going to HODL, etc. etc. etc... but no, it's all part a very predictable economic cycle.

Anyways, hopefully this helps explain why cryptocurrency isn't dead and why this extended, painful drop in value is not only healthy but essential to its long-term survival... and maybe it'll help you recognize the tell-tale signs of a bubble next time around (whether with crypto or other investments) so that you can cash out before it happens & make a ton of money or just resist that strong urge to buy back in halfway though the inevitable decline.

Cheers,
Bassdrop