Bitcoin's 'bubble' is unlike anything we've seen recently

pulse

November 6, 2017 3:56 PM

Bitcoin's 1,000% rally was quicker than homebuilder stocks' climb in the lead up to the housing crash.

Financial bubbles are often fully recognizable only after they burst — when it's too late. But the speed of bitcoin's rise has already assured many that its price is well disconnected from its underlying value.

Bitcoin's price has rocketed 646% in very volatile trading this year as its demand and popularity has grown. As the chart above from Bespoke Investment Group illustrates, the rally has been faster than most other assets that were in some of the worst bubbles in recent history, including tech and homebuilder stocks.

But there's a key difference between bitcoin's rally now and home prices, for example: the fallout from its price crash is unlikely to damage the broader economy.

Bitcoin traded down 1.8%, or 136, at about 7,227 against the US dollar at 10:50 a.m. on Monday.

Tom Lee, the co-founder of Fundstrat and one of the earliest and most prominent Wall Street voices to make a bullish bitcoin call, said he was "cautious short-term."

Bitcoin’s price jumped past Fundstrat’s 2018 target of $6,000 late in October. It continued to soar after CME Group, a leading marketplace for derivatives, said it planned to launch bitcoin futures by the fourth quarter.

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