Could there be a Bitcoin bubble?
Bitcoin is now comparing past economic bubbles due to its own phenomenal rise in 2017.
Perhaps the earliest example of an asset bubble would be the tulip craze in the 17th century in which Dutch speculators caught a dose of irrational exuberance over the arrival of tulip bulbs into Europe from the Ottoman Empire. Prices rose to unendurable levels before its remarkable crash as demand deteriorated.
The dotcom bubble of the late 1990s saw a boom in new internet companies to the stock market, which included New York-based Nasdaq exchange, and led to considerable speculation.
The subprime mortgage crisis involved banks lending to US households which could not really afford the mortgages that they were being sold but were encouraged by the massive returns. The returns were made by packaging the loans into bonds by their investment banking arms.
And so, the number of households falling into arrears on their mortgages began to rise. Investors then realised the magnitude of the bad assets pumped into the financial markets therefore leading to the 2008 collapse of the banking system.