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In 2017 the Bitcoin achieved its highest value since it was created. On December 17th, the digital coin reached a price of US$19.666,00. The great high in the price was followed by a slump that did the coin’s price drop on the subsequent days, reaching the value of US$13.062,15 on December 31st, 2017, staying in similar values until the beginning of 2018 when it started a sharp drop on Bitcoin’s price.
This oscillation, even though it was already expected for more experienced traders, provoked a cathartic state between the unaware investors and led many economists to consider the episode as the development of an economic bubble, such as the Tulip Mania occurred in Holland in the XVII century. In this episode, the tulips became luxury goods and were sold to highly increasing prices, being even launched in Amsterdam’s Stock Market.
However, the tulip’s buds take some time to flourish, so the sellers started to do “futures contracts” of the tulips, taking care of them until they bloomed. The bubble popped when the people who did the futures contracts refused to honor them, causing prejudice to the sellers and social and economic chaos so expressive to the point that the Holland Government, at the time, offered to pay 10% of the entry value of the futures contracts, what caused an economic unbalance in the country.
The Bitcoin’s case could be allusive to this episode because the value of the cryptocurrency was stagnated into US$1.000,00 since 2013, showing an increase of over 1.000% in 2017 that was followed by a cumulative decline of 80% twelve months after the great increase of the price, closing the year with the value of US$3.833,00 in December 29th of 2018.
Although it’s known that the exchange of cryptocurrencies is very unstable and influenced by various factors besides the speculation. The year of 2017 was marked by the huge popularization of the cryptocurrencies, that gained lots of investors provoking, according to Fernando Ulrich’s speech for Infomoney, one type of herd behavior that caused increasings in the price of the Bitcoin. For ABCripto’s CEO, Safiri Felix, other factors like low volatility in the exterior and the high of other types of risky assets were also determinant factors to the abrupt oscillation. The increase in the number of startups launching ICOs on the market is also considered as one of the events and the high of Bitcoin’s price.
Do you believe that this was a normal Bitcoin oscillation or you think this event is, in fact, an economic bubble? Share your opinion with us.