We have discovered an excellent and more polite way for commercial interchanges. This currency is so secure that uses a unique code stored in its DNA. In the future, all transactions will be made using this currency. Also, it is a safe option for keeping its value. Maybe you could had this thought if you had lived during the Tulipmania in the XVII century.
This really happened in the Netherlands where people started to do deals and transactions using tulip bulbs. This success was so notable that people started to demand more and more tulips, increasing the price of it. Suddenly, people lost faith about the real value of this “currency” and the price fell.
The last paragraph describes the first speculative bubble, but not the last. This happened in the end of XIX; in the 20’s when stock market produced in 1929 the great depression; and more recently in the 90’s with the “.net” crisis in 2000. Later, in 2008, we saw another big crisis, this time caused by financial assets that a large amount of people traded, without having any understanding about how their worked.
Nowadays, a large amount of money is traded by a lot of people using Bitcoins, and the speculation about it has risen. This is the obvious cause, because the price is so elevated. But, what happens if, in the same way that happened with tulips, people perceive that no exist a real value about it. I’m saying, this currency don’t have support from big governments, it is not accepted in COMEX negotiations, and nobody in a serious business negotiation will accept it like payment.
Also, anybody can make their own Bitcoin. You need only a herd of people that believe in your currency, and a little knowledge in RSA, Blowfish Encryption Algorithm or another similar.
The Majority of people don’t understand how cryptography works but believe in it. I’m not saying that cryptography is unsafe, but how much do you understand about how it works? How do you create a Bitcoin? Where it is stored? etc. In fact, Bitcoins are only “0” and “1”. If people stop using it, trying to recover the investment, inevitably the tulip fever would end. As Warren Buffett said, don’t invest your money in things that you don’t understand.
This maybe be the dumbest speculation in recent history, because not exist nothing more than believers. The difference with the another specualations is that at this time people have nothing real to recover when the bubble burst.
The quicker the inevitable end happens, the less painful it will be.