Ive been quite inactive in the forums lately but the horrible reporting Ive seen lately has pushed me to post this. Bad reporting is nothing new for Bitcoin. I have not seen worse reporting in my life than with Bitcoin, but the last articles deserve an answer.

First, it should be clear to anyone that Bitcoin was not and is not a bubble. Its not a bubble bursting or at least it shows very little of a bubble pattern.

A bubble happens because investors missjudge an asset (or group of assets) and overinvest in it. The reason for this are bad signals by wrong monetary policy usually coupled with fiscal policy and press hype. Some economists blame "psicology" but thats like saying nothing, since everything humans does is due to "phisicologic causes".

When everybody sees that the investments are not performing there is a panic and the price collapses as investors try to get rid of the assets as quick as the can. Thats why we see this patter: "slow" build up and "quick" collapse. For example, the housing bubble:



With Bitcoin we have seen the opposite pattern, a "quick" build up and a "slow" downturn:



You can see the decline has been steady. Even after the MyBitcoin "situation" the price recovered quickly showing there was confidence in the currency. Maybe the collapse from $30 to $20 can be asigned to a bubble pattern, as you can see in the graph. The rest of the decline does not follow a bubble pattern. The reason is very simple and I really dont understand why the press does not mention it.

Bitcoin monetary inflation is huge, as Bitcoin is in distribution phase. Bitcoin monetary inflation is around 30%. That is huge. And the pattern of the steady decline shows that this huge supply is overpowering demand. Its that simple.

This is how it was designed and it will change in a year when the Bitcoin monetary creation halves.