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Mid Level Reading
25 Aug, 2023

Bubble

When an asset is traded at a price higher than its intrinsic value.

Understanding Bubbles in the Crypto World

A bubble in the context of cryptocurrencies refers to a situation where the price of a particular coin or digital asset significantly surpasses its perceived intrinsic value.

Critics often argue that cryptocurrencies, including Bitcoin, are in a bubble and question whether they hold any real value.

Concerns and Market Capitalization Surge

Concerns about a potential crypto bubble peaked around 2018 when the market capitalization of cryptocurrencies experienced a surge.

At that time, the total market cap of all cryptocurrencies combined reached as high as $700 billion, even though assigning an actual intrinsic value to crypto assets was considered challenging.

Cryptocurrency Utility and Potential Beyond Speculation

Detractors often claim that cryptocurrencies primarily serve speculative purposes, pointing to the limited adoption of currencies like Bitcoin in everyday transactions.

It isn’t easy to use Bitcoin for purchasing meals or most services at traditional establishments.

However, the utility and use cases of cryptocurrencies continue to expand rapidly.

Crypto enthusiasts argue that these technologies and associated tokens will eventually demonstrate their real value.

The rise of DeFi is seen by many as evidence of the practical utility of cryptocurrencies.

Blockchain technology fuels these innovations, transforming financial services and challenging traditional systems.

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