Bubble

A bubble is a market episode in which an asset's price rises far above any defensible estimate of its underlying value, driven by speculation and the expectation of selling to a later buyer, and then collapses. Canonical examples include the Dutch tulip mania that peaked in 1637, the South Sea bubble of 1720, and the dot-com bubble, in which the Nasdaq fell about 78 percent from its 2000 peak.

Why it matters

Bubble is both a technical description and the single most common accusation leveled at bitcoin, which has been declared a bubble in nearly every year of its existence. The asset has genuinely exhibited bubble like drawdowns, losing more than 80 percent of its value from peaks in 2011, 2013 to 2015, 2018, and 2022. What complicates the label is that each collapse bottomed far above the previous cycle's peak, a pattern unlike tulips or dot-com shares that never recovered. Whether that pattern reflects a maturing monetary asset or a serially reinflating bubble is precisely what the debate is about.

In the gold vs bitcoin debate

Gold has faced the same charge: after peaking near 850 dollars per ounce in January 1980, it fell for two decades and did not reclaim that nominal level until 2008. Some economists argue any non yielding monetary asset is, in a sense, a durable bubble sustained by shared belief. Gold's rebuttal is five thousand years of retained value; bitcoin's is that every monetary good, gold included, had to pass through volatile speculative phases while being adopted.