A cryptocurrency bubble is a phenomenon where the
market
Market is a term used to describe concepts such as:
*Market (economics), system in which parties engage in transactions according to supply and demand
*Market economy
*Marketplace, a physical marketplace or public market
Geography
*Märket, an ...
increasingly considers the going price of
cryptocurrency
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It i ...
assets to be inflated against their hypothetical value. The
history of cryptocurrency has been marked by several
speculative bubble
An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...
s.
Some economists and prominent investors have expressed the view that the entire cryptocurrency market constitutes a speculative bubble. Adherents of this view include
Berkshire Hathaway
Berkshire Hathaway Inc. () is an American Multinational corporation, multinational conglomerate (company), conglomerate holding company headquartered in Omaha, Nebraska, United States. Its main business and source of capital is insurance, from ...
board member
Warren Buffett
Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net w ...
and several
laureates of the Nobel Memorial Prize in Economic Sciences, central bankers, and investors.
History
2011 booms and crashes
In February 2011, the price of
bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
rose to , then fell to that April. This spike was encouraged by several ''
Slashdot
''Slashdot'' (sometimes abbreviated as ''/.'') is a social news website that originally advertised itself as "News for Nerds. Stuff that Matters". It features news stories concerning science, technology, and politics that are submitted and evalu ...
'' posts about it.
In June 2011, bitcoin's price again rose, to . This came after attention from a ''
Gawker
''Gawker'' is an American blog founded by Nick Denton and Elizabeth Spiers and based in New York City focusing on celebrities and the media industry. According to SimilarWeb, the site had over 23 million visits per month as of 2015. Founded in ...
'' article about the dark web market
Silk Road
The Silk Road () was a network of Eurasian trade routes active from the second century BCE until the mid-15th century. Spanning over 6,400 kilometers (4,000 miles), it played a central role in facilitating economic, cultural, political, and reli ...
. The price then fell to that November.
2013 boom and 2014–15 crash
In November 2013, Bitcoin's price rose to . It then gradually declined, bottoming out at in January 2015.
2017 boom and 2018 crash
The ''2018 cryptocurrency crash''
(also known as the Bitcoin ''crash'' and the ''Great crypto crash''
) was the sell-off of most
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
starting in January 2018. After an unprecedented boom in 2017, the price of Bitcoin fell by about 65% from 6 January to 6 February 2018. Subsequently, nearly all other cryptocurrencies followed Bitcoin's crash. By September 2018, cryptocurrencies collapsed 80% from their peak in January 2018, making the 2018 cryptocurrency crash worse than the
Dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
's 78% collapse.
By 26 November, Bitcoin also fell by 80% from its peak, having lost almost one-third of its value in the previous week.
A January 2018 article by CBS cautioned about possible
fraud
In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compens ...
, citing the case of
BitConnect
Bitconnect (also spelled BitConnect and KimConnect; stylized ''bitconnect'', ticker code BCC) was an open-source cryptocurrency in 2016–2018 that was connected with a high-yield investment program, a type of Ponzi scheme. After the platform a ...
, a British company which received a
cease-and-desist order
A cease and desist letter is a document sent to an individual or business to stop alleged illegal activity. The phrase "cease and desist" is a legal doublet, made up of two near-synonyms. The letter may warn that, if the recipient does not disc ...
from the
Texas State Securities Board
The Texas State Securities Board is a Texas state agency headquartered in Austin, Texas.
The Board enforces the Texas Securities Act (TEX. REV. CIV. STAT. ANN. art. 581-1) and maintains programs for enforcement, registration of securities, regist ...
. BitConnect had promised very high monthly returns but hadn't registered with state securities regulators or given their office address.
From January to February 2018, the price of Bitcoin fell 65 percent.
By September 2018, the MVIS CryptoCompare Digital Assets 10 Index had lost 80 percent of its value, making the decline of the cryptocurrency market, in percentage terms, greater than the bursting of the
Dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
in 2002.
In November 2018, the total
market capitalization
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.
Market capitalization is equal to the market price per common share multiplied by t ...
for Bitcoin fell below $100 billion for the first time since October 2017, and the price of Bitcoin fell below $4,000, representing an 80 percent decline from its peak the previous January. Bitcoin reached a low of around $3,100 in December 2018.
Timeline of the crash
*17 December 2017: Bitcoin's price briefly reached a new all-time high of $19,783.06.
*22 December 2017: Bitcoin fell below $11,000, a fall of 45% from its peak.
*12 January 2018: Amidst rumors that South Korea could be preparing to ban trading in cryptocurrency, the price of Bitcoin depreciated by 12 percent.
*26 January 2018:
Coincheck
Coincheck is a Japanese bitcoin wallet and exchange service headquartered in Tokyo, Japan, founded by Koichiro Wada and Yusuke Otsuka. It operates exchanges between bitcoin, ether and fiat currencies in Japan, and bitcoin transactions and storag ...
, Japan's largest cryptocurrency
OTC market, was hacked. 530 million US dollars of the NEM were stolen by the hacker, and the loss was the largest ever by an incident of theft, which caused Coincheck to indefinitely suspend trading.
*7 March 2018: Compromised
Binance
Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.
Binance was founded by Changpeng Zhao, a deve ...
API keys were used to execute irregular trades.
*Late March 2018:
Facebook
Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin M ...
,
Google
Google LLC () is an American multinational technology company focusing on search engine technology, online advertising, cloud computing, computer software, quantum computing, e-commerce, artificial intelligence, and consumer electronics. ...
, and
Twitter
Twitter is an online social media and social networking service owned and operated by American company Twitter, Inc., on which users post and interact with 280-character-long messages known as "tweets". Registered users can post, like, and ...
banned advertisements for
initial coin offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cr ...
s (ICO) and token sales.
*15 November 2018: Bitcoin's market capitalization fell below $100 billion for the first time since October 2017 and the price of Bitcoin fell to $5,500.
Initial coin offerings
Wired
''Wired'' (stylized as ''WIRED'') is a monthly American magazine, published in print and online editions, that focuses on how emerging technologies affect culture, the economy, and politics. Owned by Condé Nast, it is headquartered in San Fra ...
noted in 2017 that the bubble in
initial coin offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cr ...
s (ICOs) was about to burst. Some investors bought ICOs in hopes of participating in the financial gains similar to those enjoyed by early Bitcoin or Ethereum speculators.
Binance
Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.
Binance was founded by Changpeng Zhao, a deve ...
has been one of the biggest winners in this boom as it surged to become the largest
cryptocurrency
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It i ...
trading platform by volume. It lists hundreds of digital tokens on its exchange.
In June 2018, Ella Zhang of Binance Labs, a division of the cryptocurrency exchange
Binance
Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.
Binance was founded by Changpeng Zhao, a deve ...
, stated that she was hoping to see the bubble in ICOs collapse. She promised to help "fight scams and shit coins".
2020–2022 cryptocurrency bubble
2020–2021 bubbles
From 8 March to 12 March 2020, the price of Bitcoin fell by 30 percent from $8,901 to $6,206. By October 2020, Bitcoin was worth approximately $13,200.
In November 2020, Bitcoin again surpassed its previous all-time high of over $19,000. After another surge on 3 January 2021 with $34,792.47, Bitcoin crashed by 17 percent the next day. Bitcoin traded above $40,000 for the first time on 8 January 2021 and reached $50,000 on 16 February 2021. On Wednesday, 20 October 2021, Bitcoin reached a new all-time high of $66,974.
In early 2021, Bitcoin's price witnessed another boom, rising over 700% since March 2020, and reaching above $40,000 for the first time on 7 January. On 11 January, the UK
Financial Conduct Authority
The Financial Conduct Authority (FCA) is a financial regulation, financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The ...
warned investors against lending or investments in cryptoassets, that they should be prepared "to lose all their money". On 16 February, Bitcoin reached $50,000 for the first time. On 13 March, Bitcoin surpassed $61,000 for the first time. Following a smaller correction in February, Bitcoin plunged from its peak above $64,000 on 14 April to below $49,000 on 23 April, representing a 23% mini-crash in less than 10 days, dipping below the March bottom trading range and wiping half a trillion dollars from the combined crypto market cap.
On 14 April,
Coinbase
Coinbase Global, Inc., branded Coinbase, is an American publicly traded company that operates a cryptocurrency exchange platform. Coinbase is a distributed company; all employees operate via remote work and the company lacks a physical headquar ...
, a much hyped crypto exchange went public on the
NASDAQ
The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
. Their shared grew by over 31% on their first day to $328.28 pushing their market cap to $85.8B.
Other cryptocurrencies' prices also sharply rose, then followed by losses of value during this period. In May 2021, the value of
Dogecoin
Dogecoin ( or , Abbreviation: DOGE; sign: Ð) is a cryptocurrency created by software engineers Billy Markus and Jackson Palmer, who decided to create a payment system as a "joke", making fun of the wild speculation in cryptocurrencies at the ...
, originally created as a joke, increased to 20,000% of value in one year. It then dropped 34% over the weekend.
By 19 May, Bitcoin had dropped in value by 30% to $31,000, Ethereum by 40%, and Dogecoin by 45%. Nearly all cryptocurrencies were down by double-digit percentages.
Major cryptocurrency exchanges went down amid a market-wide price crash. This was partly in response to
Elon Musk
Elon Reeve Musk ( ; born June 28, 1971) is a business magnate and investor. He is the founder, CEO and chief engineer of SpaceX; angel investor, CEO and product architect of Tesla, Inc.; owner and CEO of Twitter, Inc.; founder of The Bori ...
's announcement that
Tesla would suspend payments using the Bitcoin network due to environmental concerns, along with an announcement from the
People's Bank of China
The People's Bank of China (officially PBC or informally PBOC; ) is the central bank of the People's Republic of China, responsible for carrying out monetary policy and regulation of financial institutions in mainland China, as determined by ...
reiterating that digital currencies cannot be used for payments.
Bitcoin and other cryptocurrencies experienced a solid recovery after Elon Musk met with leading
Bitcoin mining
The bitcoin network is a peer-to-peer payment network that operates on a cryptographic protocol. Users send and receive bitcoins, the units of currency, by broadcasting digitally-signed messages to the network using bitcoin cryptocurrency ...
companies to develop more sustainable and efficient Bitcoin mining. After bottoming out on July 19, by early September Bitcoin had reached $52,633.54 while Ethereum grew by over 100% to $3,952.13. After a short but significant fall, both crypto's peaked on November 7, 2021 at $67,566.83 and $4,812.09, respectively. The NASDAQ would peak 12 days later on November 19 at 16,057.44. Since bottoming out after the covid crash in 2020, Bitcoin had grown over 1,200% in value while Ethereum had grown over 4,000% in value while the NASDAQ had only grown around 134%.
In September, Bitcoin officially became a legal tender in
El Salvador
El Salvador (; , meaning " The Saviour"), officially the Republic of El Salvador ( es, República de El Salvador), is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south b ...
with many news sources wondering what countries would be next.
As of October 2021, China has continued shutting down crypto trading and mining activities, and Tesla has not yet resumed payments with Bitcoin.
2021–2022 crash
After their peak, the crypto market began to fall with the rest of the market. By the end of 2021, Bitcoin had fallen nearly 30% from its peak down to $47,686.81 and Ethereum had fallen about 23% to $3,769.70. In December 2022, the
Washington Post
''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large nati ...
reported "the sense that the crypto bubble has definitively popped, taking with it billions of dollars of investments made by regular people, pension funds, venture capitalists and traditional companies."
= Collapse of Terra-Luna
=
In May 2022, the
stablecoin
Stablecoins are cryptocurrencies where the price is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities (such as precious metals or industrial metals), or another cryptocurrency.
In theory, the p ...
TerraUSD
Terra is a blockchain protocol and payment platform used for algorithmic stablecoins. The project was created in 2018 by Terraform Labs, a startup co-founded by Do Kwon and Daniel Shin. It is most known for its Terra stablecoin and the associa ...
fell to 10 US cents. This was supposed to be pegged to the US dollar via a complex algorithmic relationship with its support coin Luna. The loss of the peg resulted in Luna falling to almost zero, down from its high of $119.51. The collapse wiped out $45billion of market capitalization in a week. On 25 May, a proposal was approved to reissue a new Luna cryptocurrency and to decouple from and abandon the devalued UST stablecoin. The new Luna coin lost value in the opening days of being listed on exchanges.
In the wake of Terra-Luna's collapse, another algorithmic stablecoin, DEI, lost its peg to the dollar and started to collapse.
=Private litigation in the United States
=
On January 7, 2022, a class-action lawsuit was filed against EthereumMax alleging it to be a
pump and dump
Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operat ...
scheme with media personality
Kim Kardashian
Kimberly Noel Kardashian (formerly West; born October 21, 1980) is an American socialite, media personality, and businesswoman. She first gained media attention as a friend and stylist of Paris Hilton, but received wider notice after the sex ...
, former professional boxer
Floyd Mayweather Jr.
Floyd Joy Mayweather Jr. (''né'' Sinclair; February 24, 1977) is an American boxing promoter and former professional boxer. He currently owns a team in the NASCAR Cup Series named The Money Team Racing. As a professional boxer he competed b ...
, former
NBA
The National Basketball Association (NBA) is a professional basketball league in North America. The league is composed of 30 teams (29 in the United States and 1 in Canada) and is one of the major professional sports leagues in the United St ...
player
Paul Pierce
Paul Anthony Pierce (born October 13, 1977) is an American former professional basketball player. He played 19 seasons in the National Basketball Association (NBA), predominantly with the Boston Celtics. He was most recently an analyst on ESPN ...
, and other celebrities also being named in the lawsuit for
promoting the Ether cryptocurrency on their
social media accounts
Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not.
Etymology
The word "social" derives from ...
.
On February 18, the
U.S. 11th Circuit Court of Appeals ruled in a lawsuit against
Bitconnect
Bitconnect (also spelled BitConnect and KimConnect; stylized ''bitconnect'', ticker code BCC) was an open-source cryptocurrency in 2016–2018 that was connected with a high-yield investment program, a type of Ponzi scheme. After the platform a ...
that the
Securities Act of 1933
The Securities Act of 1933, also known as the 1933 Act, the Securities Act, the Truth in Securities Act, the Federal Securities Act, and the '33 Act, was enacted by the United States Congress on May 27, 1933, during the Great Depression and after ...
extends to
targeted solicitation using social media.
On the same day, a class-action lawsuit was filed against
SafeMoon
SafeMoon LLC is a cryptocurrency and blockchain company created in March 2021. The company also has a SafeMoon token (SFM) which trades on the BNB Chain blockchain. The token charges a 10% fee on transactions, with 5% redistributed (or ''ref ...
alleging it to also be a pump and dump scheme with professional boxer
Jake Paul
Jake Joseph Paul (born January 17, 1997) is an American media personality and professional boxer. He initially rose to fame on Vine, before playing the role of Dirk Mann on the Disney Channel series ''Bizaardvark'' for two seasons. Throughout ...
, musician
Nick Carter, rappers
Soulja Boy
DeAndre Cortez Way (born July 28, 1990), known professionally as Soulja Boy (formerly Soulja Boy Tell 'Em), is an American rapper and record producer. He rose to prominence, after his self published debut single "Crank That (Soulja Boy)" peake ...
and
Lil Yachty
Miles Parks McCollum (born August 23, 1997), known professionally as Lil Boat, is an American rapper, singer, songwriter, and producer. He first gained recognition on the internet in 2015 for his singles "One Night" and "Minnesota" (featuring ...
, and social media personality
Ben Phillips also being named in the lawsuit for promoting the SafeMoon cryptocurrency with misleading information on their social media accounts.
On April 1, a class-action lawsuit was filed in Florida against the
LGBcoin cryptocurrency company,
NASCAR
The National Association for Stock Car Auto Racing, LLC (NASCAR) is an American auto racing sanctioning and operating company that is best known for stock car racing. The privately owned company was founded by Bill France Sr. in 1948, and hi ...
, professional
stock car racing
Stock car racing is a form of automobile racing run on oval tracks and road courses measuring approximately . It originally used production-model cars, hence the name "stock car", but is now run using cars specifically built for racing. It ori ...
driver
Brandon Brown, and political commentator
Candace Owens
Candace Amber Owens Farmer ( Owens; born April 29, 1989) is an American conservative author, talk show host, political commentator, and activist. Initially critical of United States President Donald Trump and the Republican Party, Owens has be ...
alleging that the defendants made
false or misleading statements about the LGBcoin and that the founders of the company had engaged in a pump and dump scheme.
On April 13,
Coinbase
Coinbase Global, Inc., branded Coinbase, is an American publicly traded company that operates a cryptocurrency exchange platform. Coinbase is a distributed company; all employees operate via remote work and the company lacks a physical headquar ...
received a class-action
securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in los ...
lawsuit from its shareholders for including false and misleading statements and
omissions in the
registration statement In the United States, a registration statement is a set of documents, including a prospectus, which a company must file with the U.S. Securities and Exchange Commission before it proceeds with a public offering.
See also
*Securities Act of 1933
*F ...
and
prospectus of its
initial public offering
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
.
On June 13,
Binance
Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.
Binance was founded by Changpeng Zhao, a deve ...
received a class-action lawsuit from more than 2,000 investors accusing the company of false advertising in promoting terraUSD.
On June 17,
TerraForm Labs
Terra is a blockchain protocol and payment platform used for algorithmic stablecoins. The project was created in 2018 by Terraform Labs, a startup co-founded by Do Kwon and Daniel Shin. It is most known for its Terra stablecoin and the associ ...
received a class-action lawsuit in the United States alleging the company misled investors in violation of federal and California securities laws in marketing its cryptocurrencies in a manner that resembled
securities
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
.
On July 7,
Celsius Network
Celsius Network LLC is a bankrupt cryptocurrency lending company. Headquartered in Hoboken, New Jersey, Celsius maintained offices in four countries and operated globally. Users could deposit a range of cryptocurrency digital assets, including ...
received a lawsuit from a former cryptocurrency investment manager alleging the company failed to implement adequate
risk management strategies or accounting practices to
hedge
A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoini ...
the firm against cryptocurrency price fluctuations and protect its ability to repay its
depositors
A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below.
...
, and that the company was operating an effective
Ponzi scheme
A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are comin ...
.
On July 21, an ex-
Coinbase
Coinbase Global, Inc., branded Coinbase, is an American publicly traded company that operates a cryptocurrency exchange platform. Coinbase is a distributed company; all employees operate via remote work and the company lacks a physical headquar ...
employee and 2 other men were charged with
wire fraud
Mail fraud and wire fraud are terms used in the United States to describe the use of a physical or electronic mail system to fraud, defraud another, and are Federal crime in the United States, federal crimes there. Jurisdiction is claimed by the ...
and conspiracy to commit wire fraud. This marked the first time charges were brought to people involving crypto assets.
= Collapse of FTX
=
In early November,
Binance
Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.
Binance was founded by Changpeng Zhao, a deve ...
, one of the largest crypto exchanges in the world, announced it would be dissolving its holdings in FTX Token (FTT) with reports that most of
FTX liquidity
Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include:
* Market liquidity, the ease with which an asset can be sold
* Accounting liquidity, the ability to meet cash obligations when due
* Liqui ...
was based in this coin and was very unstable. This resulted in a "
bank run
A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. In other words, it is when, in a fractional-reserve banking system (where banks no ...
" on FTX resulting in 90% of all FTT being withdrawn. The price of FTT fell from $22 on November 7 to under $5.00 on November 8, an 80% drop.
Abracadabra.com's stablecoin "magic internet money" (MIM) also briefly lost its peg to the
US Dollar
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
for the first time since May 2022. This all resulted in a
liquidity crisis In financial economics, a liquidity crisis is an acute shortage of ''liquidity''. Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrowe ...
with the company unable to pay off the withdrawls. On November 8, rival Binance announced plans to buy the company to save it from collapse. This sent shockwaves through the crypto market and led to a 10% drop in
Bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
price and a 15% drop in Ether price. The following day, however, Binance immediately withdrew its offer causing Bitcoin and Ether to plummet another 14% and 16%, respectively, to their lowest levels since November 2020. The same day, the SEC and Justice Department launched an investigation into the company. FTX filed for bankruptcy protection on November 11.
Characterization as 'bubble'
Bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
has been characterized as a
speculative bubble
An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...
by eight
winners of the Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, officially known as The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Swedish: ''Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne''), is an award funded ...
:
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was th ...
,
Robert J. Shiller
Robert James Shiller (born March 29, 1946) is an American economist, academic, and author. As of 2019, he serves as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for ...
,
Joseph Stiglitz
Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the Joh ...
,
Richard Thaler
Richard H. Thaler (; born September 12, 1945) is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. In 2015, Thaler was pr ...
,
James Heckman
James Joseph Heckman (born April 19, 1944) is a Nobel Prize-winning American economist at the University of Chicago, where he is The Henry Schultz Distinguished Service Professor in Economics and the College; Professor at the Harris School of Pub ...
,
Thomas Sargent
Thomas John Sargent (born July 19, 1943) is an American economist and the W.R. Berkley Professor of Economics and Business at New York University. He specializes in the fields of macroeconomics, monetary economics, and time series econometrics ...
,
Angus Deaton
Sir Angus Stewart Deaton (born 19 October 1945) is a British economist and academic. Deaton is currently a Senior Scholar and the Dwight D. Eisenhower Professor of Economics and International Affairs Emeritus at the Princeton School of Public ...
,
and
Oliver Hart;
and by central bank officials including
Alan Greenspan
Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
,
Agustín Carstens
Agustín Guillermo Carstens Carstens (born 9 June 1958 in Mexico City) is a Mexican economist who has served as the general manager of the Bank for International Settlements since 1 December 2017. He served as governor of the Bank of Mexico from ...
,
Vítor Constâncio
Vítor Manuel Ribeiro Constâncio, GCC, GCIH (born 12 October 1943) is a Portuguese economist and academic who served as Vice President of the European Central Bank from 2010 to 2018. He previously served as Governor of the Bank of Portugal fr ...
,
and
Nout Wellink
Arnout Henricus Elisabeth Maria "Nout" Wellink (born 27 August 1943) is a Dutch economist and former central banker.
In 2010, ''Financial News'' determined that Wellink was the man who was believed to have wielded the greatest influence on worldw ...
.
The investors
Warren Buffett
Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net w ...
and
George Soros
George Soros ( name written in eastern order), (born György Schwartz, August 12, 1930) is a Hungarian-American businessman and philanthropist. , he had a net worth of US$8.6 billion, Note that this site is updated daily. having donated mo ...
have respectively characterized it as a "mirage" and a "bubble",
while the business executives
Jack Ma
Jack Ma Yun (; born 10 September 1964) is a Chinese business magnate, investor and philanthropist. He is the co-founder and former executive chairman of Alibaba Group, a multinational technology conglomerate. In addition, he co-founded Yunfeng ...
and J.P. Morgan Chase CEO
Jamie Dimon
James Dimon (; born March 13, 1956) is an American billionaire businessman and banker who has been the chairman and chief executive officer of JPMorgan Chase – the largest of the big four American banks – since 2005. Dimon was previously on ...
have called it a "bubble"
and a "fraud",
respectively. However, Dimon said later he regrets calling Bitcoin a fraud.
Other notable skeptics are
Bill Gates
William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
,
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
co-founder and philanthropist,
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was th ...
, economist and
Nobel prize laureate
The Nobel Prizes ( sv, Nobelpriset, no, Nobelprisen) are awarded annually by the Royal Swedish Academy of Sciences, the Swedish Academy, the Karolinska Institutet, and the Norwegian Nobel Committee to individuals and organizations who make out ...
,
Bruce Schneier
Bruce Schneier (; born January 15, 1963) is an American cryptographer, computer security professional, privacy specialist, and writer. Schneier is a Lecturer in Public Policy at the Harvard Kennedy School and a Fellow at the Berkman Klein Cente ...
, cryptographer, computer security expert, and public policy lecturer at
Harvard University
Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
, and
Molly White, author of the ''Web3 Is Going Just Great'' website.
See also
*
Blockchain#History, a broader overview of the history of blockchain technology
**
Cryptocurrency#History
*
Cryptocurrency and crime
Cryptocurrency and crime describes notable examples of cybercrime related to theft (or the otherwise illegal acquisition) of cryptocurrencies and some of the methods or security vulnerabilities commonly exploited. Cryptojacking is a form of cybe ...
*
Crypto Ponzi scheme
A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are coming ...
References
Further reading
*
{{Cryptocurrencies
Economic bubbles
Bubble
Bubble, Bubbles or The Bubble may refer to:
Common uses
* Bubble (physics), a globule of one substance in another, usually gas in a liquid
** Soap bubble
* Economic bubble, a situation where asset prices are much higher than underlying fundame ...
Financial markets
2020s economic history