There is a saying that if too many people start talking about how much money they are making with this or that amazing investment, it is time to get out. Did somebody say bubble?
As the price of Bitcoin went from £1,000 to £12,000 in just about a year, that is a word we hear quite often these days. Will it burst? That is an answer we don’t have, as bubbles can only be called that once prices drop sharply.
And if we look back in time, this has happened more than once.
The first recorded huge economic bubble was the Dutch tulip mania, back in 1637. Tulip bulbs were selling for 10 years salary for a skilled worker. Yes, you read that right!
At about 4 months salary for your median earner, a £12,000 bitcoin seems like a bargain.
There was a gold bubble in 1980 as well, when high inflation spiked the price of gold.
Then most recent bubbles, the Dotcom one in 2000 and the US housing bubble of 2007, had something in common: people were taking more risks than they could afford to. Investing in the stock market or in real estate is a great way to build up your net worth, but remember to never invest money you can’t afford to lose!
If it looks too good to be true, it probably is.
Is Bitcoin the next bubble? It is too early to tell, as regulations and trading are in the very early stages still. So proceed carefully.
Find out more information on economic bubbles in the infographic below, courtesy of ETX Capital