THE PURPLE ELEPHANT IN THE ROOM
Regardless of mainstream reservations, rampant speculation, and near-certain odds of a bust, Bitcoin
is here to stay. Cryptocurrencies are capable of changing how we identify, manage and mitigate
political risks across borders. Konrad Petraitis brings us a case study in the risks and promise of
cryptocurrencies - Venezuela.
Regular descent into what is Bitcoin holders are doubling and easier one instead, usually
only retrospectively described tripling their initial investment in without noticing the substitution.
as insanity has been a feature weeks. Our tendency to believe For instance, “should I invest in
good times will last forever is Bitcoin?” (which entails
frequently magnified by understanding blockchain and
confirmation biases - the impulse price discovery momentum) is
to collect only the data that replaced by “do I like Bitcoin?” (an
confirms one’s existing appealingly anti-establishment
beliefs. Which explains why Bitcoin product that everyone is making
holders are swayed by Saxo Bank’s money on).
of capitalism for centuries.
Speculative euphoria is not
new. In any boom or bust cycle,
there is always a period of
exceptionalism. In other words,
there is always a timely excuse
why a product is different and
2018 forecast predicting Bitcoin will
why it can’t be like anything else. hit US$60,000, instead of listening
Today, Bitcoin is that product.
to warnings from a Wall Street
The hype surrounding initial
unprecedented – and incredibly
complicated. We speculate on
assets like bitcoin, however,
because it’s part of our human
long as people believe that there
is something magical or new
CEO.
about the valuation of
coin offerings, mining,
blockchains and crypto assets is
This period can continue for as
The habit is compounded by what cryptocurrencies. There's no
Nobel laurate Daniel Kahneman, guarantee Bitcoin won’t reach
describes as intuitive heuristic. US$1 million, just as there's no
When faced with a difficult guarantee the bubble won't burst
question, we often answer an tomorrow. But even if it bursts –
and it most likely will – it's very
nature.
unlikely to go away.
The Dutch tulip mania in 1673, did
not do away with the flower. The
dot-com bubble in 2001 did not
eliminate the internet. The one
exception, however, might be
Beanie Babies – the 1990’s craze
that saw one purple stuffed
elephant sold for US$3,000.
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