Is Bitcoin a Bubble? Insights from Kirill Bensonoff, Crypto Investor and Entrepreneur

Since the decline of the price of Bitcoin in late 2017, people have been speculating about the big Bitcoin bubble. Bitcoin is a decentralized and distributed digital currency with no single administrator, and is recognized as the world’s first cryptocurrency. Somewhere between currency and commodity, Bitcoin-enthusiasts and critics alike have been attempting to predict when the potential bubble could burst.

According to Kirill Bensonoff, crypto investor and entrepreneur, to discuss a potential bubble begs the question: how much money is in cryptocurrencies? The current value of all the Bitcoin in the world is estimated to be around $41 billion, no small feat for a relatively new currency. Since Bitcoin’s inception digital currencies have been a hot topic in the media and traders and the public alike have speculated about the industry’s future. As much as people would like to bet on digital currencies, prior bubbles of a similar nature and the bear market have recently started to affect investors and traders’ confidence.

Bensonoff is an experienced investor and his opinion is that digital currencies like Bitcoin have undergone an extended bear market losing about 60% of the market value since the beginning of 2018. (Note: The points provided in this article are for informational purposes only, not financial or investment advice or offer to invest.) This extended bear market has had multiple causes, from regulators entering the space to other corrections causing downward trends. Considering how much money is in cryptocurrencies, it is unsurprising that people would panic with the unknown impacts of first-ever regulations impacting the space. People dislike volatility, and inexperienced investors are more likely to panic-sell their currencies in large quantities which will affect the market price.

Investors who are holding Bitcoin can look towards the past to speculate on the value of their digital assets such as Bitcoin, but should not bet on a crash just yet. Bensonoff states that while crypto price fluctuations may be daunting to coin holders, these are not necessarily indicators for the end of digital currencies.

How Past Tech Bubble Bursts Serve as Lessons-Learned for the Crypto Market

The institutional investor will be familiar with the dot-com bubble of the early 2000s. There are a few key things which can indicate a bubble is taking place. The first is large scale disruption, with minimal present application and secondly, an asset which is difficult to value. The dot-com bubble was a product of rapid growth based on excessive speculation.

What strikes fear into the hearts of many Bitcoin investors is the cycle of events starting with the Nasdaq peak in value in the year 2000. This was was followed by the bubble burst which lasted over two years. The crash shut down a number of large online retailers and tech companies and market stock price as a whole declined in value, a nightmare for stockholders around the world. The bubble was characterized by an eagerness on the part of investors to invest in any dot-com company at any valuation in the hope that the company would reach astronomical profits. Instead, these companies incurred heavy losses after spending heavily to scale at an accelerated pace without being able to turn a profit.

Recently investors in cryptocurrencies have become increasingly concerned that digital currencies are following the lead of the dot-com era and that a bubble is imminent. For Wall Street investors, the rapid scaling of initial coin offerings via cryptocurrency exchanges is a pattern that is all too familiar for dot-com veterans. However, Bitcoin has previously been subject to four bear waves, dropping in value up to fifty percent before recuperating. The overall value of the network of cryptocurrency is set at ~$144B which is significantly lower than the peak of the dot-com bubble. If a bubble burst is in store for investors, Bensonoff says it may still be a long way off.

The current number of digital currencies and ICO’s being created is far exceeding the numbers for 2017 and is predicted to keep increasing. Bensonoff is the founder of the Boston Crypto Meetup, and from his experience the crypto industry has not yet reached its full potential and interest in the market remains high from millennials in particular. It is estimated that up to 20% of millennials hold some form of cryptocurrency with plans to use the funds for their retirement, living and travel expenses.

Bensonoff also argues that virtually every market has a bubble of some kind which repeatedly grows and deflates. The difference is that decline in value of crypto is accelerated due to the nature of the technology which has seen an acceleration of growth unlike any other industry.

How Did Kirill Bensonoff Become a Crypto Entrepreneur?

Bensonoff is of the opinion that while the Bitcoin bubble is yet to burst, growth has peaked for 2018 and new highs are unlikely. Currently the movement is all in altcoins, although growth here has also been stunted by the overall market outlook. The Bitcoin market as a whole requires more time to absorb the shock of recent regulatory speculations and bearish trends. Bitcoin may seem as if it falls into the typical characteristics of a bubble or crash for two reasons:

  1. It currently has minimal present purpose.  
  2. It is difficult to establish the true value of it as a digital asset.  

It is estimated that 40% of all Bitcoin is held by around 1000 people, known as ‘whales’. The fear  fear that these individuals could collude to affect the price of Bitcoin in general is worrying to other Bitcoin investors. Experts disagree on the subject of crashes, with some believing that a market-wide crash is nigh and others like Bensonoff arguing that the market needs time to mature before solid conclusions about digital currencies can be made. Experts believing that Bitcoin is not set to crash any time soon believe the volatility in value that the market is undergoing is simply market correction taking place.

When it comes to big money investments, Bensonoff advises new crypto investors to follow the age old rule of only investing what can be afforded to be lost. Digital assets are still in the early stages, and while the market patterns may appear similar to bubbles of the past, many predictions about the future of the market are restricted to speculation.

Kirill Bensonoff is a successful tech entrepreneur who has had multiple successful exits from companies like Unigma, and more. Bensonoff has also previously been featured in Inc., Bitcoin Magazine and Huffington Post for his experience in entrepreneurship, blockchain technologies and cryptocurrency.

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