Bubble is a term that refers to a phenomenon in the digital currency market where the price of a crypto asset increases very quickly to a level that far exceeds its intrinsic value, followed by a sharp and often sudden drop in price.

Getting to Know the Crypto Bubble

Over the years, many people have stated that cryptocurrencies (especially Bitcoin) are a bubble.

By this, they mean that the price of a particular coin, or digital assets in general, is much higher than their “real” value. In fact, crypto skeptics believe that most cryptocurrencies actually have zero value.

The Peak of Crypto Bubble Worries

Concerns about a possible crypto bubble reached a peak around 2018 when cryptocurrency market capitalization soared. At some point, the total market cap of all cryptocurrencies reached around $800 billion at that time — although it is generally considered impossible to assign a true intrinsic value to crypto.

Characteristics of a Crypto Bubble

• Rapid Price Increase: Prices of crypto assets increase rapidly over a short period of time, often without a strong fundamental reason.
• Excessive Speculation: Investors and traders buy assets based on the expectation that prices will continue to rise, not on the intrinsic value or practical application of the technology.
• FOMO (Fear of Missing Out): The fear of missing out drives more buying, where new investors continue to enter the market in the hope of making quick profits.
• Sudden Price Correction: After reaching a peak, crypto asset prices typically experience a sharp and rapid decline, often wiping out most of the gains made during the bubble period. 

Impact of the Crypto Bubble

• Market Volatility : The market can be very volatile, with sharp and unpredictable price movements.
• Risk of Loss: Investors who buy at price peaks risk large losses when the bubble bursts.
• Loss of Trust: The bursting of a bubble could reduce investor and public confidence in crypto assets and blockchain technology.
• Project Filtering: Bubbles are often followed by a filtering period, during which less sustainable projects or those founded solely to capitalize on speculative trends fail, while those with a strong fundamental foundation survive and continue to thrive.

Also Read

What Are Crypto Wallets?

What is Blockchain Transmission Protocol (BTP)?

What is Bitcoin Dominance (BTCD)?

What is Blockchain Mutual Credit?

DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change randomly