Some Wall Street pros call Bitcoin the greatest bubble in history. They say it may go as high as the 6 trillion dot-com bubble. But they may have underestimated it greatly. How high could it really go?

4 Similarities with the dot-com craze

Yes, the crypto craze is comparable to the dot-com craze in several aspects:

it’s all about technology that can and will change the world

people attach endless, sometimes irrational hopes with it

its shiny vision sucks in capital from other, less attractive assets

nobody can really evaluate value of its individual assets

And these characteristics propel the formation of a speculative bubble that surely will pop sooner or later. Of course this won’t stop the underlying technology to grow and develop and the market with the real world dominators will come back again. But let’s now focus on the speculation bubble itself.

The Wall Street experts name 6 trillion dollars as the benchmark for the size of the bubble since it was the size of the dot-com bubble. We are talking about the overall market capitalization, or more precisely: the excess capitalization, which constitutes up to 90% of the overall market capitalization.

Please forgive me for making simplified assumptions and simply translating the factors one-to-one, but it’s a rough calculation just to make us aware of the factors that can influence the bubble size and give us a clue about the dimensions we are talking about.

Let’s continue with 6 trillion market cap as the starting point for the ease of argument.

3 Factors that will magnify the crypto bubble

Please observe, that the crypto bubble can achieve a much greater size due to 3 factors, and

1. Greater Money Supply

What the experts seem to overlook is the fact, that since the year 2000 there is globally 3.5 times more money in circulation. It is all the excess money that was printed and needs to flow into the most attractive assets. This could multiply the size of the bubble accordingly.

So 3.5 x 6 trillion = 21 trillion.

2. Global Phenomenon

The dot-com bubble was mostly limited to the western (US, Europe, Japan)tech stocks with some single outliers in the eastern Europe, but the crypto craze is a global phenomenon. The money supply of these regions provides for roughly 50% of the global money supply. Again, we are talking about 2 times more capital at play:

2 x 21 trillion = 42 trillion

3. Everybody can play

The stock investments of the dot-com era were limited to the individuals who were wealthy and knowledgable enough to have access to the stock market. The majority of population couldn’t participate in the speculation. This is different with the crypto era. A smartphone or access to a computer is enough to play the crypto game, a prerequisite that almost everybody fulfills nowadays. The people who don’t participate in stock markets are majority of the world population, but they account for (very roughly) 50% of the world capital. So we have another factor of 2:

2 x 42 trillion = 84 trillion

Voila!

Much, much bigger bubble

We are talking about a 84 trillion dollar crypto bubble. The 6 trillion dollar dot-com bubble pales in comparison!

Of course the bubble can burst earlier, before reaching this size or hold later. It depends on an igniting event that lets a bubble burst.

Considering the fact, that the crypto market capitalization is around 700 billion right now, it can still grow by the factor of 120!

Please leave your comments below. Have I forgotten about any factor? Did I got the number of any of these 3 factors wrong?

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