Bitcoin, Tesla and GameStop Bubbles as a Flight to Focal Points

Jan Libich & Liam Lenten

Published: March 2021

This article discusses the current bull runs in many assets such as Bitcoin, Big Tech and the meme stocks, concluding that they are very likely bubbles (well above their fundamental value). We then highlight a unique set of circumstances due to which the duration, magnitude, and subsequent correction of this market exuberance may be very different from previous bubble episodes. These circumstances have led to an ever-growing amount of global liquidity chasing a small number of widely-known assets that have played the role of Schelling’s ‘focal points’. In combination with extremely low (even negative) returns on conventional safe assets, the usual ‘flight to safety’ has been (partly) superseded by a ‘flight to focal points’.