The behavioral economics of Bitcoin 2020, is it another bubble?

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raven.lerwick
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As an economist, I think the Bitcoin price rollercoaster has been one of the most interesting monetary experiments of this century! While last time was clearly a bubble, this time I do not think it is.

Like to read? Check out the script of this video here: https://www.moneymacro.rocks/2020-12-18-bitcoin-bubble/

One the clearest signs of a bubble is the presence of what Nobel Prize Winner Robert Shiller calls irrational exuberance. Meaning most people are extremely enthusiastic about the price of an asset and that the general sentiment is that it will only go up. In 2017, there was clearly irrational exuberance.

If asset prices have risen really quickly, that doesn’t mean we are in a bubble. After all, there could be fundamental reasons for why these prices have risen so much. For example, it could be the case that the central bank has purchased many assets, driving the fundamental price up by making financial assets scarcer.

This along with a fundamental value increase in Bitcoin is likely what is driving the price today.

Narrated and produced by Dr. Joeri Schasfoort (University of Cape Town)

Attribution
- Peter Schiff's YouTube channel for his image
- Image of Rober Shiller by Presidential Office Building via Wikimedia CC-BA
- Fragment of the movie the Big Short by Paramount (check it out, great movie on bubbles!)
Category
Crypto Investing
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