When Bitcoin began its sell off in mid December, certain investors were concerned about the potential negative impact on NVIDIA (NVDA).These investors were right to be concerned, as I will explain why in this article.
A common word that is thrown around these days in light of Bitcoin’s meteoric rise in 2017 is ‘Bubble’. Bitcoin went on a tear in 2017, generating an unbelievable 1,500% year to date return. Understandably, people have become wary of the sky-high market cap of the flagship cryptocurrency, as can be seen during the panicked sell-off and subsequent recovery that happened recently. Much of this fear likely stems from the all too recent memory of the 2008 financial crisis. In fact, we see from a variety of sources that participation in the stock market has not recovered to pre-crisis levels, leading many Americans to be left out of the bull market rally. Bubble seems to be a term that is thrown out lightly these days, as investors are on edge thinking that the next recession is just around the corner. Market psychology aside, let’s examine whether Bitcoin actually fits the bill of a Bubble.