Tuesday, November 26, 2013

Bitcoin vs. South Sea Stock Bubble

Mebane Faber writes:
This is just for fun, I have no idea if or when the bitcoin train will ever get derailed.  You could compare this to any speculation that has gone parabolic, I just like ones that are over 200 years old.

Chart 1 is actual bitcoin and South Sea Stock values plotted with SS peak lined up with current BC data.

Chart 2 takes the last 8 months and lines them up with similar starting points.

Granted I’m violating my #1 rule of charting but these are more fun to look at on a non log basis…

Chart 3 is the most important, and it shows what happens after a bubble pops.  Namely, a 90% loss for those who bought at the top.  Now, I know many of you believe bitcoin will go to $1,000,000, but as a speculation (and to be clear this IS a speculation) you have to be at least be prepared for this to happen.  Do you have an exit plan?  Will you stick with it?  Or will you be like so many before you that ride a speculation all the way down?

At least think about it.

Looking for an exit strategy? I have one: here.


  1. Charles MacKay, "Extraordinary Popular Delusions and the Madness of Crowds." Available where fine books are sold.

  2. Bitcoin will be to money what the internal combustion engine was to travel.

    Stop investing in buggy whips.

  3. problem is that with all other bubbles the supply could increase. How is that going to happen here? Just with knock offs? Will they all be adopted?