According to Bloomberg Bitcoin is the biggest bubble in history. We say: “Not a chance”
Today we read this headline on Bloomberg: “Bitcoin, the Biggest Bubble in History, Is Popping”
The term “bubble” indicates an unjustified increase in the price of an asset which, as such, must necessarily be corrected downwards over the long term. In the free market, the price of an asset is produced by supply and demand: the price of that asset rises if, for example, the demand rises while the supply remains the same.
To understand if the increase in the price of an asset is “justified”, it is necessary to see what has produced a rising demand. Given the subjective theory of value, if an increase in demand is the result of the free choices of people, then that price increase is always justified. This doesn’t mean that there cannot be a long-term correction, but not necessarily so: it depends on the progress of people’s preferences over time (and therefore on the ability of that asset to satisfy those preferences).
On the other hand, if an increase in demand is the result of a distortion of people’s free choices through coercive measures, then that price increase is never justified. This means that there must necessarily be a downward correction. And this correction will take place as soon as the artificial support of the coercive measures will cease. The typical example is stock prices inflated by artificially low interest rates produced by an artificial expansion of money and credit (made possible by fiat money and the government monopoly on money).
Another example is the fiat money itself (the euro, for example). The purchasing power of fiat money is so unjustified (and, due to the growing monetary inflation, less and less justified over time) that if the obligation of each person to use it (an obligation defended by government brute force) would fail, that purchasing power would instantly collapse to zero.
Today that the price of bitcoin is more or less seven thousand dollars, and Bloomberg does not even question the fact that the purchasing power of fiat money is unjustified. Instead it claims that to be unjustified is the price of Bitcoin. Can you spot the underlying incoherence? Bitcoin, the market currency that, unlike the euro or the dollar, no one is forced to use and that is entirely based on people’s preferences. Preferences like the one of being owners of their own money (many people still don’t know that money deposited in a bank belongs to the latter by law); like the one of not being subject to “bail in” to save banks intrinsically bankrupt because of the fractional reserve banking; like the one of not being subject to forced withdrawals; like the one of not being paralyzed financially by some bureaucratic decision; like the one of not being monitored in every purchase; and like other ones, including the purely psychological one: to prove what freedom is, even if in only one of its aspects. Yes, tomorrow those preferences may disappear. But in that same tomorrow, more and more people may find they have.
Who today speaks of Bitcoin as the biggest bubble in history, deserves the fiat money.
