No More 10 Minute Breaks: Is Bitcoin a Bubble? 96% of Economists Say ‘Yes’

The soaring price of bitcoin is likely the result of an unsustainable speculative bubble, according to the vast majority of private-sector economists surveyed by The Wall Street Journal.

“If it looks like a duck, and quacks like a duck, it’s a duck,” said Diane Swonk, founder of consultancy DS Economics.

Fifty-one out of 53 forecasters, or 96%, said bitcoin has been experiencing a speculative bubble. Just two forecasters said its recent gains weren’t a bubble.

The price of bitcoin has surged this year, especially in recent weeks, drawing attention from mainstream investors and warnings from regulators about its risks.

Bitcoin advocates have argued that the digital currency, while volatile, has rapidly increased in price due to increasing recognition of its value as a decentralized global currency and the potential for its underlying blockchain technology.

Mark Nielson of MacroEcon LLC predicted the price of bitcoin would likely increase to $45,000 over the next two years; it has climbed from below $1,000 late last year and briefly jumped above $19,000 at one point last week. Brian Schaitkin, senior economist at the Conference Board, said he’s “sort of agnostic about whether or not it’s a bubble,” and that the price could continue to multiply in value or fall to zero.

Others are skeptical.

“The news of new highs seems to beget more action and a new high—a clear sign of a bubble,” said Amy Crews Cutts, chief economist at credit-reporting agency Equifax

Bubbles involve outsized growth in the price of an asset beyond its true value, driven by speculative buying. Classic examples include the Dutch tulip mania that crested in the 1630s and the U.S. stock-market boom that crashed in 1929.

“Bitcoin is nothing more than crypto-tulip bulbs,” said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness.

Some bubbles burst without causing major damage to the broader economy while others can have severe consequences, such as the U.S. housing bust that triggered a global financial crisis 10 years ago.

“Now that deep envy has set in amongst those who do not own bitcoin it seems this mania can enter the final stage; one which can exist for quite some time before panic and crash come into play,” said Constance Hunter, chief economist at accounting firm KPMG LLP.

The Journal’s monthly survey of 62 business, financial and academic economists was conducted Dec. 8-11. Not every economist answered the question about bitcoin.

Bitcoin Is the World’s Hottest Currency, but No One’s Using It (Dec. 2)

Bitcoin Mania: Even Grandma Wants In on the Action (Nov. 29)

Small Investors Latch On for Bitcoin’s Wild Ride (Nov. 29)

Bitcoin Moves Toward Mainstream, Poised to Join Oil, Gold in Futures Trading (Oct. 31)

from Real Time Economics http://ift.tt/2yms460