Bubbles, busts, investor psychology ... and bitcoin

THE surge in bitcoin has attracted much interest. Over the last five years, it has soared from US$12 to over US$8,000; this year it's up 760 per cent. Its enthusiasts see it as the currency of the future and increasingly as a way to instant riches with rapid price gains only reinforcing this view. An alternative view is that it is just another in a long string of bubbles in investment markets

Nobel economics laureates Daniel Kahneman, Robert Shiller and Richard Thaler and many others have shown that investors - and hence investment markets - can be far from rational. This along with crowd psychology can drive asset prices far from fundamentally justified levels. This note provides a refresher on the psychology of investing before returning to look at bitcoin.

Irrational man and the madness of crowds