Chapter 4: Cryptocurrency bubble

A cryptocurrency bubble is a phenomena that occurs when the market progressively deems the current price of cryptocurrency assets to be inflated in comparison to its hypothetical value. A number of speculative bubbles that have been on a boom-to-bust cycle have been a defining characteristic of the history of cryptocurrencies.

A number of famous investors and professionals in the field of economics have stated the opinion that the entire cryptocurrency market is a speculative bubble. Warren Buffett, a member of the board of directors at Berkshire Hathaway, as well as multiple recipients of the Nobel Memorial Prize in Economic Sciences, central bankers, and investors, are among those who subscribe to this viewpoint for its validity.

Although it reached a high of $1.06 in February 2011, the price of Bitcoin dropped to $0.67 in April of that same year. This increase was further fueled by a number of posts on Slashdot that discussed it. In June of 2011, the price of Bitcoin increased once more, reaching a total of $29.58 USD. This came up as a result of an article published on Gawker that discussed the dark web bazaar known as Silk Road. After that, the price dropped to $2.14 in the United States for the month of November.

During the month of November 2013, the price of Bitcoin reached $1,127.45 USD. After that, it began a slow slide, reaching its lowest point of $172.15 in January of 2015.

The majority of cryptocurrencies experienced a sell-off beginning in January 2018, which is referred to as the cryptocurrency crash of 2018. This event is also known as the Bitcoin crash and the Great crypto crash. The price of Bitcoin saw a decline of almost 65 percent between January 6 and February 6, 2018, following an unparalleled rise in 2017. After Bitcoin's meltdown, practically all other cryptocurrencies followed suit and saw a similar decline. As of September 2018, the value of cryptocurrencies had dropped by 80 percent from their all-time high in January 2018, making the cryptocurrency crash of 2018 that much more severe than the fall of the dot-com bubble by 78 percent. Additionally, by the 26th of November, Bitcoin had dropped by 80 percent from its highest point, having lost about one-third of its value in the one week prior.

An article published by CBS in January 2018 issued a warning regarding the possibility of fraud. The story cited the case of BitConnect, a British firm that was issued a cease-and-desist order by the Texas State Securities Board. Despite the fact that BitConnect had guaranteed extremely high monthly returns, the company had not registered with state securities regulators and had not disclosed the location of their business.

The total current worth of Bitcoin dipped below $100 billion for the first time since October 2017, while the price of Bitcoin fell below $4,000, signifying an 80 percent decline from its peak in January of the previous year. Both of these events occurred in November of 2018. A low point of approximately $3,100 was attained by Bitcoin in December of 2018.

The price of Bitcoin briefly achieves a new all-time high of $19,783.06 on December 17, 2017, according to current data.

The price of bitcoin drops below $11,000 on December 22, 2017, marking a drop of 45% from its all-time high.

The price of Bitcoin drops by twelve percent on January 12, 2018, as speculation spreads that South Korea may be getting ready to implement a ban on the trading of cryptocurrencies on the market.

The hacking of Coincheck, the largest over-the-counter cryptocurrency market in Japan, occurred on January 26, 2018. The hacker is responsible for the theft of 530 million US dollars worth of NEM, which results in Coincheck suspending trading indefinitely. It is the largest loss that has ever been incurred as a result of a theft occurrence.

On March 7, 2018, it was discovered that unauthorized trades were being executed using compromised Binance API keys.

The advertisements for initial coin offers (ICO) and token sales have been banned on Facebook, Google, and Twitter as of the late month of March in 2018.

As of the 15th of November in 2018, the entire current worth of Bitcoin has dropped below $100 billion for the first time since October of 2017. Additionally, the price of Bitcoin has dropped to $5,500.

In the year 2017, Wired made the observation that the initial coin offerings (ICOs) bubble was on the verge of bursting. The initial coin offerings (ICOs) were purchased by certain investors with the expectation of gaining a share of the financial profits that were experienced by early Bitcoin or Ethereum speculators.

As a result of this explosion, Binance has become the most successful cryptocurrency trading platform in terms of volume, making it one of the most likely beneficiaries of this increase. The exchange provides listings for hundreds of different digital tokens.

During the month of June in 2018, Ella Zhang, who works at Binance Labs, a part of the cryptocurrency exchange Binance, expressed her desire to see the bursting of the initial coin offering (ICO) bubble. Her promise was to assist in the "fight against scams and shit coins."

From the 8th to the 12th of March in the year 2020, the price of Bitcoin dropped by thirty percent, going from $8,901 to $6,206. By the month of October in the year 2020, the price of Bitcoin was roughly $13,200. During the month of November in the year 2020, Bitcoin once again reached its previous all-time high of $9,000.

The price of Bitcoin saw a period of tremendous fluctuations in the beginning of 2021. On January 3, 2021, it reached a high of $34,792.47, but then it dropped by 17 percent the following day. On January 7, 2021, it finally surpassed $40,000 for the first time. On January 11th, the Financial Conduct Authority of the United Kingdom issued a warning to investors saying that they should be prepared "to lose all of their money" if they were to lend or invest in cryptoassets. A milestone of $50,000 was attained by Bitcoin for the first time on February 16th. The price of Bitcoin officially topped $61,000 for the first time on March 13th. Following a more moderate correction in February, Bitcoin experienced a precipitous decline, falling from its all-time high of $64,000 on April 14 to below $49,000 on April 23. This represents a mini-crash of 23% in a span of less than ten days, bringing the price down below the trading range that was at its lowest point in March and erasing half a trillion dollars from the total current value of all cryptocurrencies.

Coinbase, a cryptocurrency exchange that has received a lot of attention, went public on the NASDAQ on April 14th. On their first day of trading, their shares increased by more than 31%, reaching $328.28, which brought its market valuation to $85.8 billion.

During this time period, the values of other cryptocurrencies experienced a significant increase, which was then followed by a decline in value. The value of Dogecoin, which was initially developed as a joke, more than doubled in value in just one year, reaching a value of 20,000% in May of 2021. Shortly after that, it had a decrease of 93%.

By the 19th of May, the value of Bitcoin had decreased by thirty percent, reaching $31,000. Ethereum's value had decreased by forty percent, while Dogecoin's value had decreased by forty-five percent. A significant number of cryptocurrencies experienced a decline of double-digit percentages. A significant cryptocurrency exchange known as Binance fell down in the midst of a price meltdown that affected the entire market, and traders are now looking for justice for their losses. Elon Musk's announcement that Tesla would cease payments using the Bitcoin network due to environmental concerns, as well as an announcement from the People's Bank of China repeating that digital currencies cannot be used for payments, were both factors that contributed to this decision making.

Following Elon Musk's meeting with prominent Bitcoin mining companies to discuss the development of more sustainable and efficient Bitcoin mining, Bitcoin and other cryptocurrencies saw a robust resurgence. After reaching its lowest point on July 19, Bitcoin had reached $52,633.54 by the beginning of September, while Ethereum had increased by more than 100 percent to $3,952.13. Both cryptocurrencies reached their highest point on November 7, 2021, at $67,566.83 and $4,812.09, respectively, after experiencing a brief but considerable decline. Twelve days later, on November 19th, the NASDAQ would reach its highest point of 16,057.44.

Bitcoin was formally recognized as a form of currency in El Salvador in September, and several news outlets speculated on other countries will follow El Salvador in this regard.

Beginning in October 2021, China has continued to put a stop to operations related to cryptocurrency mining and trading.

Despite the fact that they do accept payment with Dogecoin for certain things, Tesla has not yet resumed accepting Bitcoin as a form of payment as of October 2024.

Following the market's top, the cryptocurrency market started to decline along with the rest of the market. When the year 2021 came to a close, Bitcoin had dropped about thirty percent from its all-time high to $47,686.81, and Ethereum had dropped approximately twenty-three percent to $3,769.70. According to an article that was published in December 2022 by The Washington Post, there was "the sense that the crypto bubble has...