For a brief period this month an electronic form of currency called bitcoins were all the rage. Promoted as an alternative to paper or "fiat" currency, bitcoin caught a popular wave with the public and became the it investment of the moment. With high profile investors like the Winklevoss twins, it seemed like nothing could stop the momentum.
Then as quickly as it inflated, the bitcoin bubble burst. After rising from $20 in February to $266 on April 10th, bitcoin crashed on April 11th, dropping more than $100 before trading was halted. The crash took the price of a bitcoin down more than 75% from its highs to the lows. As usual, it's the latecomers who are getting hit with the biggest losses.
Bitcoin will make a nice cautionary tale someday, but so do stories of the housing bubble, the Internet bubble, and every collapse since Dutch Tulips in the 17th century. Some even say the decline of Apple (AAPL) shares and gold's recent price slide are indicative of modern-day bubbles.
If the masses could really learn anything from these disasters then bubbles would be a thing of the past, rather than regular occurrences. Most people just can't help themselves when tempted with the prospect of easy money.
That doesn't mean you have to be the next victim of a bubble mania. In this edition of Investing 101, Robert Luna of SureVest walks us through 5 signs of an investment bubble.
1) Valuations deviate significantly from a long-term historical averageRead More »from The Bitcoin Implosion: 5 Signs of an Investing Bubble