And if it bursts, the results are likely to be spectacular.
“In terms of how it ends, bubble history suggests it will be with a bang, rather than a whimper,” said Sharon Zoller, an economist at ANZ. “I can’t think of any reason why this time would be different.”
To better understand what may lie ahead, here’s the lowdown on four famous financial bubbles in history:
In the early 17th century, speculation helped drive the value of tulip bulbs in the Netherlands to previously unheard of prices. Newly imported from Turkey, tulips were a big novelty at the time.
Hard data from those days is scarce, so it’s difficult to gauge exactly how much prices soared. But people were putting up their homes as collateral, according to the Rijksmuseum — the Museum of the Netherlands — in Amsterdam.
Like many bubbles, prices were driven by greed or the fear of missing out. Speculators were buying bulbs in the hope that they could sell them on at an even higher price. Again, it didn’t last. A flurry of sales caused a domino effect, and prices collapsed.
Stephen Innes, head of Asian trading at currency broker Oanda, believes bitcoin bubble could go the same way.
“Prices will become so out of reach of the common man that ultimately demand fades,” he said.
In the 18th century, shares in the South Sea Company, a British trading firm, soared on expectations it would soon reap bumper profits from trade with South America.
But the big money never materialized.
South America was controlled by Spain, which was at war with the British Empire at the time. That made a British trading monopoly in the region unlikely, according to the Encylopedia Britannica…