And it also led many to believe that the initial bitcoin craze was manufactured and destined to bust.Īnother institutional hit for bitcoin–which probably had the most sustained effect–was the SEC’s refusal to approve a bitcoin exchange-traded fund (ETF). This theory stems from an academic paper, which cast Tether in a very damning light. dollar to make for a less volatile cryptocurrency) was used to manipulate the bitcoin market and cause a large run-up in price. Justice Department is reportedly looking into is that the digital coin Tether (which is supposedly pegged to the U.S. Meanwhile, there has been plenty of speculation that bitcoin’s big rise may have been due to a pump-and-dump scheme. This happened right around the time that bitcoin slipped from its peak value, and it certainly seemed to accelerate its drop.

And in early January 2018, the Japanese exchange Coincheck disclosed a hack worth a whopping $534 million. This, once again, sent shockwaves through the community–but also had the unfortunate impact of normalizing these types of hacks for some people.Īt the end of 2017 and beginning of 2018, more people–especially those in the mainstream finance world–were paying attention to bitcoin and cryptocurrency trading. In 2016, the DAO–a blockchain organization that was based on Ethereum–lost what was worth $50 million at the time, due to a technical error someone seized upon.

But it was still early enough for people to believe that the blockchain system was still getting all the technical kinks out.īut the hacks didn’t stop. Then, in 2014, it halted transactions and slowly copped to a crypto-hack to the tune of $473 million, the biggest hack of its kind at the time, and it gave many people pause. Gox was the go-to service for handling transactions. He told Bloomberg this month that he made a profit twice due to this canny call.īut to understand the dynamic that led to this year’s depressing year for crypto, we actually should start a few years before 2018. The only logical explanation: It’s a bubble. Moreover, the less we understand the object of the bubble, the greater the scope for greed and FOMO to fill in the blanks.ĭow, at the time, simply could not come up with a good reason for the crypto’s insane performance. What they all have in common, however, is they require emotion to truly go parabolic. We also began to see a robust supply response.īubbles are complex dynamics. The fever in the post-Thanksgiving moonshot ran hotter than we’d seen before. But when the bubble bursts, FOMO turns into fear of losing, which makes for an especially rapid plunge.Īmong those who called it, hedge fund manager Mark Dow wrote almost exactly a year ago about his decision to short bitcoin after future trading on it first began:īut this time feels different. Random companies were “ pivoting to blockchain” for no apparent reason other than that it seemed like a way to create buzz. Essentially, bitcoin became an international fever. Then there was the FOMO element, which only compounded things. Like previous bubbles, people were basing their belief in the cryptocurrency on their emotions, not any intrinsic value.

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