bubble, at least as I define a bubble. It is a mystery story as well. Such story appeal can fuel contagion, and an epidemic of interest develops. We know that disease epidemics can mutate and then return again. But the Bitcoin events clearly fit this definition, in 2013 in the original flush of excitement for Bitcoin, and then, after a temporary collapse in Bitcoin value, again now in 2017. In 2017, the second rise in Bitcoin appears to have something to do with the appearance of ICOs, initial coin offerings, which give Bitcoin an investment banking patina too. How global is it? Irrational Exuberance in 2005, I defined a bubble as a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increases, and bringing in a larger. Gold itself is a sequence of speculative bubbles, starting in ancient times, and still continuing after thousands of years. It would be better if they had been named speculative epidemics. Usually nothing exogenous is needed to reverse a bubble.
Nobel Prize winner Robert Shiller explains how bitcoin resembles past market bubbles. We asked Professor Robert Shiller, who has written about the economic and psychological aspects of market.
Does Bitcoin look like a bubble to you? The bubble just wears off, as Bitcoin did starting in 2014. The word bubble, as an analogy, may be misleading. Many researchers would find this definition unworkable, because it has psychological terms. What do you think is the underlying story driving the rise in Bitcoin prices? And, wonder of wonders, the genius who invented it, one Satoshi Nakamoto, has never been found. The concept of Bitcoin comes from some arcane mathematics of cryptography, which gives the story a sort of glamorous spy-vs-spy appeal, like a James Bond movie. It appeals to independent-minded young people who find government regulations boring and intrusive. What do you think could cause a reversal in this story? Speculative bubbles do not end decisively like that. Soap bubbles burst once and for all. Bitcoin is the best example today of a speculative bubble, at least as I define a bubble.