Tulipmania was the first major financial bubble. Investors began to madly purchase tulips, pushing their prices to unprecedented highs; the average price of a single flower exceeded the annual income of a skilled worker.
Tulips sold for over 4000 florins, the currency of the Netherlands at the time. As prices drastically collapsed over the course of a week, many tulip holders instantly went bankrupt.
Tulip Mania reflects the general cycle of a bubble: investors lose track of rational expectations, psychological biases lead to a massive upswing in the price of an asset or sector, a positive-feedback cycle continues to inflate prices, investors realize that they are merely holding a tulip that they sold their houses for, prices collapse due to a massive sell off and many go bankrupt.
From Dec 1 - 1634 to 5 Feb 1637, an index of Dutch tulip prices (see chart above) soared from approximately one guilder per bulb to a lofty sixty guilders per bulb.
Here are Some other Bubbles which Took Place in history
Cryptocurrencies and especailly Bitcoin are the talk of the town of late
The South Sea Company was a British joint-stock company founded in 1711, created as a public-private partnership to consolidate and reduce the cost of national debt. The company was also granted a monopoly to trade with South America.At the time it was created, Britain was involved in the War of the Spanish Succession and Spain controlled South America. There was no realistic prospect that trade would take place and the company never realised any significant profit from its monopoly. Company stock rose greatly in value as it expanded its operations dealing in government debt, peaking in 1720 before collapsing to little above its original flotation price; the economic bubble became known as the South Sea Bubble.
Let us understand Bitcoin
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets.
Bitcoin, created in 2009, was the first decentralized cryptocurrency.Bitcoin and its derivatives use decentralized control as opposed to centralized electronic money/central banking systems.The decentralized control is related to the use of bitcoin's blockchain transaction database in the role of a distributed ledger.
One Bitcoin is a single unit of the Bitcoin (BTC) digital currency, just like a Dollar it has no value by itself, it has value only because we agree to trade goods and services in exchange for a higher amount of the currency under our control and we believe others will do the same.
To keep track of the amount of Bitcoins each of us owns the blockchain uses a ledger, a digital file that keeps track of all Bitcoin transactions.
Blockchain system has been designed to use nodes agreement to order transactions and prevent the fraud .The Bitcoin network orders transaction by putting them together into groups called blocks, each block contains a definite amount of transactions and a link to the previous block.
For Eg :- If Sunil wants to send Bitcoins to Ramesh he broadcasts a message to the network that says the amount of Bitcoins in his account should go down by 5 BTC, and the amount of Ramesh account should go up by the same quantity. Each node in the network will receive the message and apply the requested transaction to their copy of the ledger, thus updating the account balances.
The fact that the ledger is maintained by a group of connected computers rather than by a centralized entity like a bank has several implications
While in our bank system we only know our own transactions and account balances, on the blockchain everyone can see everyone’s else transactions.While you can generally trust your bank, the Bitcoin network is distributed and if something goes wrong there is no help desk to call or anyone to sue.The blockchain system is designed in such a way that no trust is needed, security and reliability are obtained via special mathematical functions and code.
Bitcoin has volatility mainly due to the fact that there is a limited amount of coins and the demand for them increases by each passing day.one must not forget that Bitcoin, as it currently exists, will never be able to support anywhere near the world’s total transaction volume.
Every high-grade Bitcoin network client stores the entire transaction history, and this record has already become as large as 100GB.That’s the full capacity of a cheap laptop’s or the most advanced smartphone’s storage. The more transactions processed on the Bitcoin network, the faster the size grows. And the greatest bulk of it has appeared over the past couple of years.
The pie chart above shows approximately 20 of the largest mining pools, but the top 4 control more than 50% of all computing power.
To make it simple let’s see It country wise
You can also refer the below Link to View Volume participation county wise https://coin.dance/volume/localbitcoins
People are currently accepting Bitcoin against payment because of its Rising Value however when prices dive Southwards it would be interesting to see how risk Unfolds with its Diminishing Value.
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