Merkle Video Series Cover image – Gabriel Ryan (1920 × 1080 px)

Busting Myths #3 – “Bitcoin is a Bubble”

by | May 26, 2022

In the third instalment of our Busting Myths series; Gabriel Carey of Cadre Capital Partners and Ryan McMillin of Merkle Tree Capital discuss and debunk the myth that bitcoin is a bubble.


Gabriel Carey:
Thanks Ryan. And moving onto Bitcoin specifically, it’s just another bubble, like the tulip industry. That’s what many people out there are thinking.

So, like any good bubble, it’s worth jumping on the wagon for a certain period of time, but when the bubble bursts you don’t want to be on board. What’s your view on whether Bitcoin is in a crypto bubble?

Ryan McMillin:
Bitcoin price movements are often called a bubble and compared to the tulip bubble of the 17th century. It’s true, a large number of speculative retail investors are trading Bitcoin, but relevant comparisons probably stop there. The tulip bubble popped after six months and never recovered.

Bitcoin has had multiple large corrections, and recovered to a new high each time. Crypto is a new asset class. All new assets, products, experience growing pains each time it faces a new challenge, like the hack of an exchange, or maybe a war or global pandemic. There’s uncertainty around how it will respond. But after each test it’s bounced back to a new high. A better analogy than tulips would probably be the internet.

Although units of the internet were not traded, it’s adoption curve is quite similar, and new cases are discovered practically every day. Every year the users and transactions on the Bitcoin network increase. This is what drives the network effect and drives the price of Bitcoin up as a token. Much like the internet, the more users the more valuable the network.