The Bitcoin Bubble Will Burst, Just Wait

Just like the doomed Beanie Babies investing craze or the dot-com stock bubble of years past, Bitcoin's time will come. Here's why.

(Image credit: juliannafunk)

If you invested in the markets circa 1999, it is hard to observe the Bitcoin mania and not experience the feeling that you’ve seen this movie before and know how it will end — in losses and tears. The Internet was a great idea that convinced a lot of great minds to invest capital and energy into businesses that have transformed the world — Amazon, eBay, Cisco, PayPal … the list is very long (though, in fairness, the list of non-survivors is even longer — but they are not here to remind us of their nonexistence).

Rising stock prices of Internet companies also brought unscrupulous people out of the woodwork. In 1999, if a company added dot-com to its name it was an instant bet that its stock price would pop at least 20% (I am probably being too conservative) on this non-news. In a slightly later stage of the bubble, when Internet incubators were in vogue (after the astronomical surge of CMGI), thinly traded companies would announce that they were changing their business model — pizzerias would become “Internet incubators” and their stocks would surge a few hundred percent in a day. What does a pizzeria know about the Internet or incubating start-up companies? Nobody knew or cared. Management cashed out on suckers who bought the pop in the stock price.

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Vitaliy Katsenelson, CEO and CIO
Chartered Financial Analyst (CFA), Investment Management Associates

Vitaliy Katsenelson is the CEO and Chief Investment Officer at Investment Management Associates. He has written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. Sign up here to get Katsenelson's latest articles in your inbox.