Bitcoin bubble not popping yet?

Apart from users of a certain commodity, any market is generally composed of two distinct types of players from two, often, opposing schools of thought. They are the firm foundation analysts such as long term investors and technical analysts such as high speed traders. However, with regulatory systems generally moving at a much slower pace than technological ones, drivers of the so-called "new economy" are often subject to much speculative frenzy. One such speculative frenzy was seen in the Netherlands during the Tulip bubble of the 1630's [1,2]. And another similar bubble was seen in the 1840's with the rail industry in Britain[3]. Thousands of investors on moderate income would buy the, then unregulated, railway shares which were speculated to give rise to a new economy. The railway market however collapsed significantly in 1845 ruining some parties but also allowing established railways to purchase strategic lines cheaply. A more recent bubble was the 1990's Dotcom bubble with companies seeing their share price rising hundreds of percentage points by simply adding ".com" in their company names[4,5].

However, the Netherlands is today indeed the world's top Tulip exporter, trains are an integral part of Britain, and interactions without internet is difficult in modern times. Although the underlying block-chain technology does seem unfailing, there does seem to be a cryptocurrency bubble; largely driven by news. Besides being contingent on news and hype, the Bitcoin price "puppet" is also an ardent rock-n-roller to the strings of rumors and this seems disproportionately leveraged by some market actors. A trader, for example, would generally aim to buy low and sell high while an investor would reason that taking profit is stopping profit. A trader's main concern, for example, is profit. And, regardless of price movements, the trader can always profit by longing or shorting a position; with a total disregard on the utility of underlying asset being traded. On the other hand, some shady groups might find more use in the actual use of Bitcoin as we have seen the Silk road. So, market prices cannot correctly reflect any intrinsic value of a "new economic driver" by disregarding the motivations of the different players; although intrinsic value is totally subjective because value in general is.

Take high speed trading for example. Market entry points and exit points are crucial for high speed traders. These can generally be determined by estimating when market bulls bought the dip and market bears sold the tip. Statistical tools might help to determine price support and resistance levels with a certain degree of confidence. And a common knowledge among high speed traders is the actual speed of the price movement. That is, it is not only the price increase that determines entry or exit points but it is also how fast a price is increasing or decreasing. Rapid growth in monetary value or other liquid values does usually justify profit taking. Profit taking in turns implies a market pullback with high possibility for consolidation flags. However, despite the bullish overbought situation in early December 2017, and despite the January 2018 market pull back, the technology, itself, is redefining information security, democracy, economics, job markets, whereby, for example, individuals are rather handsomely remunerated for merely sharing opinions on social media (see for example steemit.com), among various other disruptions. So, the opposite schools of asset valuation, the "castle in the air" theory of Keynes [6] with primarily psychological posits and the "firm foundation theory" of Bachelier [7] with utility underpinnings, do seem to unusually share striking postulates in the cryptocurrency sphere.

And, while the bulls are back, steem to break resistance at 10,000 USD is not yet amassed...

References:
1)Garber PM (2001) Famous first bubbles: The fundamentals of early manias. mit Press

2)Neal LD and Weidenmier MD} (2003) Crises in the global economy from tulips to today. In Globalization in historical perspective 2003 Jan 1 (pp. 473-514). University Of Chicago Press.

3)Odlyzko A (2010) Collective hallucinations and inefficient markets: The British Railway Mania of the 1840s. University of Minnesota. 2010 Jan 15.

4)Ljungqvist A and Wilhelm WJ (2003) IPO pricing in the dot‐com bubble. The Journal of Finance. Apr 1;58(2):723-52.

5)Panko RR (2008) IT employment prospects: beyond the dotcom bubble. European Journal of Information Systems. 2008 Jun 1;17(3):182-97.

6)Keynes JM (1936) The General Theory of Employment, Interest, and Money (Harcourt, New York).

7)Bachelier, L. (1900) Ann. Sci. Ecole Norm. Sup. III-17 , 21–86.