On January 1st 2017 the valueof all assets within the crypto currency market was only around eighteenbillion dollars, over the last year this market has seen an insane spike inthat value, reaching nearly eight hundred billion dollars, which is around afour thousand percent gain in one year. This exponential growth has lead tomany debates around the market and whether or not this is just anotherspeculative bubble ready to burst. Aspeculative bubble is a spike in assets value with in a particular industry,commodity, or asset class. Throughout history speculative bubbles have existed in world markets,and with the world’s recent economic advancements, they are only accelerated.
Bubbles have different driving factors or reasons for their growth, howevermost of them involve a similar combination of fundamental and psychologicalforces. The fundamentals are simple in the beginning the price of an asset riseto levels that are well above either historical norms or its intrinsic value.Then, the psychology factor comes in and causes those who feel like they havemissed out on that initial rise to jump in and invest. Shortly after, once theabnormally high price begins to fall short-term investors are shook out or sellout. I believe this is a unique genre,which contains subset genres such as bitcoin, and other historic bubbles that Iwill cover. Some genre related terms I plan toexplore would be the conventions, and the audience.
One challenge I see my self facingis explaining how exactly this is a genre, which at this moment does not seemvery hard but I am having second thoughts about it, in class we talked a genrecould be almost anything. This is something that is widely accepted and hasbeen replicated, just like Facebook and other subsets of social media. One of the first large scale asset bubbles was the Dutch tulip bulb, in1593 the tulips were brought over from turkey and introduced to the Dutch. The flowers were a novelty and thereforestarted at an expensive price. The tulips would begin to contract a non-fatalvirus, which would result in new types of colors and pedals increasing therarity of an already unique flower. This sparked a spike in the price of the tulipsand led to a widespread desire for the flowers.
People began to deal in bulbs, withoutknowing the true value of the flowers people continued to essentially speculateon the tulip market believing it had no limits. While everyone was raving about this new store of value, and all thepotential it had to grow in value, the big buyers came in, and at the time thatwas the garden centers of world. Theywere filling up there inventories and getting as much of the tulips as theycould resulting in a depletion of the supply and an increase in demand andscarcity. Soon enough word spread aboutthis and prices were rising quickly, people were trading their land, and lifesaves, essentially liquidating anything they could to purchase more tulips.People were getting rich to quick; the tulips experienced and enjoyed a morethen two thousand percent increase in value in just one month. Does any of thissound familiar? To me it does because I’ve seen it happen in a market I my selfam invested in.
Needless to say these gains wouldn’t persist and theartificially inflated price of the tulips were not an accurate reflection ofthe value of a tulip bulb. Once people started to sell their bulbs realizing thiswas not the safest investment, it leads to an extreme domino effect ofprogressively lower prices. And as more people began to see this decreasepeople began to panic sell regardless of losses.
Goals– relate and show similarconventions of this speculative bubble to the current one with bit coin