Bitcoin is a mania that sooner or later will come to an end, the way every mania ends: falling demand in the face of rising supply. And when that happens, Bitcoin prices could be driven back to $1000.
That’s according to some estimates which set the fundamental value of Bitcoin at $1,142.
Still, it may take quite some time for this to happen.
“We have known for a long time that rationality of behavior and expectations is not enough to prevent bubbles, as it is not enough to guarantee that the price of an asset is equal to its fundamental value,” says Christos Giannikos, Professor of Finance at Baruch College.
But the Bitcoin crowd expects demand to soar, as the digital currency gains a growing acceptance as a medium of transactions, and a speculative “asset.”
So what could cool demand for the digital currency?
There are a couple of things that could kill the hype for the digital currency and help push demand in the opposite direction. One of them is a Lehman or Enron-style fraud event, not necessarily in the Bitcoin market, but in some other cryptocurrency market, which brings to mind the wild west mentality of mid-19th century capitalism…