Economic bubble or bubble gum?
Jamari Mohtar 

IN late January, the price of Bitcoin and other cryptocurrencies went into a tailspin. The value of Bitcoin fell more than 60% in early February – from its lofty high of about US$20,000 (RM78,341) in December to below US$8,000. The global mainstream media had a field day. “Bitcoin biggest bubble in history, says economist who predicted 2008 crash” screamed The Guardian on Feb 2.

“Bitcoin and other cryptocurrencies tank” flashed CNN on Feb 5, and “Here's How Hard Bitcoin and Other Cryptocurrencies Are Crashing Right Now” headlined on Feb 6.

And Business Insider had this: “ROUBINI: ‘The Mother Of All Bubbles And Biggest Bubble in Human History Comes Down Crashing.’”

Can you imagine those gloating at such headlines? And especially at the fate which befell cryptos and those deemed stupid and idiotic to ever engage in investing and trading in Bitcoin?

If you feel I’m too sensitive, then let’s see what happened in the past each time the prices of Bitcoin and others cryptos nosedived.

“So, That’s the End of Bitcoin Then”, said Forbes on June 20, 2011. “Bitcoin Is Headed to the ‘Ash Heap’" sounded USA Today on Jan 16, 2015. And “The Death of Bitcoin”, said The Daily Reckoning on May 5, last year.


Attempted Murder

As reckoned by one expert, Bitcoin has been declared dead at least 171 times since 2011.

Newsletter writers, journalists, and academics have called it a “Ponzi scheme”. Even JPMorgan CEO Jamie Dimon – whose bank has been fined billions for financial abuse – calls Bitcoin a fraud whose value is “probably zero”.

These are nothing more than attempts to assassinate Bitcoin, which failed miserably because not only does it survive but becomes stronger with each attempted murder!

Guess who got to be featured in most of these hysterical articles? The folks, especially Nobel Laureate-type economics professors who seem possessed by the demon of “the fear of the bubble syndrome”.

It’s in their body and soul, such that they sometimes sound rather incoherent.

Take for instance, Nobel Laureate and Yale University Sterling Professor of Economics Robert Shiller who was quoted in Fortune magazine on December 21, as saying: “It seems like the dotcom bubble all over again, or the housing bubble all over again.”

This prompted a rejoinder from the managing editor of CoinDesk who’s also a former editor-in-chief of American Banker, Marc Hochstein, who asked: “So: dotcom or housing? Pick one, professor. Because there's a meaningful difference.

“Debt bubbles, like the one that overheated the US housing market in the 2000s and ultimately sparked a global financial crisis, leave behind encumbrances.

“Tech bubbles, like the 1990s internet mania, leave behind infrastructure.”

Or take the case of Nobel Laureate and professor of economics and international business at New York University, Nouriel Roubini.

Dubbed Dr Doom and credited with predicting the 2008 financial crisis, Roubini said a sharp fall in the value of Bitcoin on Feb 2 was the latest proof that it was the biggest bubble in history and destined for a crash “all the way down to zero”.

In the same manner that Marc Hochstein asked Shiller, I would also like to ask Roubini: “So: a one-day drop in value on Feb 2 of 12% or a two-month drop in value on Feb 2 of 61%? Pick one, professor.

“Because whether it’s a 12% or 61% fall, do you know professor that Bitcoin had already crashed 94% from June to November 2011 – from US$32 to US$2?

Or that it crashed again at 85% in November 2013 to January 2015 from US$1,166 to US$170?

And yet the “all the way down to zero” wish of Roubini seems to be something like striving for the goal of a receding or elusive end.

In other words, as you think your prediction is right, past events have already proven you wrong and you are not even aware that that is so.

And yet in another case, Nobel Laureate and Charles R. Walgreen Distinguished Service Professor of Behavioural Science and Economics at the University of Chicago, Richard Thaler, recently said: “After taking a close look at the markets, cryptocurrencies are what ‘most looks like a bubble’ and ‘the market that to me most looks like a bubble is that of Bitcoin and its sisters’.” 

But despite his analytical prowess, Thaler remains clueless on when the bubble might burst.

The Nobel Laureates are just like your admirable tip-top surgeons in their younger days who, as they aged, failed to keep up-to-date with the latest state-of-the-art development in surgery.

Thus, they became a menace as their outmoded surgical techniques and outlook on surgery may cost the life of patients who are under their knives.

If the Nobel Laureates had not remained content in being cocooned in their ivory tower mindset, then they would have realised that the volatility in the price of Bitcoin is no big deal because here are the facts since 2011:

• Crashed 94% in June to November of 2011 from US$32 to US$2;

• Fell 43% in June 2012 from US$7 to US$4;

• Crashed 80% in April 2013 from US$266 to US$54;

• Crashed 85% in November 2013 to January 2015 from US1,166 to US$170;

• Fell 40% in September last year from US$5,000 to US$2,972; and

• Crashed 61% in January from US$19,206 to US$7,500.


Bubble gum

By the middle of February, when Bitcoin fell below US$6,000, it looked dead set that the Nobel Laureates finally got it because it looked so realistic than that the crypto will go all the way down to zero.

But just a day after this precipitous fall, it shot up from to USD 8,000 plus just in a single day.

As I began to write this article in the wee hours of Feb 18, Bitcoin was trading at just over US$9,700, based on data from

About four hours later, and by the time I had written more than 50%, Bitcoin traded at just over US$11,000.

And finally, when I had completed the first draft of this article some two hours later, Bitcoin was trading at US10,549.04.

And yes, by the time this article is published, if the price of Bitcoin were to go down the drain, the Nobel Laureates will have the last laugh, right?

Wrong! I will be the one who will have the last laugh because in all of my articles I have never once said that cryptos are not in a bubble or that the crypto bubble will never go bust.

All I said is that it is a pain in the neck for anyone to repeat ad nauseam that cryptos are in a bubble because anyone with some intelligence knows it is.

The difference with Nobel Laureates is that they believe a bubble must necessarily be a negative economic phenomenon.

But the hard facts have proven time and again that a bubble can span for so many years without any discernible damage to the economy.

Hasn’t the term soft landing ever occurred to them? When the property market in Singapore overheated some years ago due to the asset price bubble, the city-state introduced several rounds of cooling measures to either postpone the bursting of the bubble or avoid a hard landing when the bubble burst.

With a brilliant mind and perhaps good funding in hand, the Nobel Laureates could contribute immensely to mankind if they embark on research to better the science of forecasting the probability of when exactly a bubble will burst (within an acceptable margin of error of course!) instead of wasting time pronouncing crypto is a bubble.

As for me, I view the crypto bubble like a piece of bubble gum.

When it bursts, it does not metaphorically explode in my face to cause more than bodily harm.

Rather, it just literally sticks to my face – an inconvenience, no doubt, but the sort I can easily manage.

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments:

This article first appeared in Focus Malaysia Issue 274.