Cryptocurrency bubble
A cryptocurrency bubble is a phenomenon where the market increasingly considers the going price of cryptocurrency assets to be inflated against their hypothetical value. The history of cryptocurrency has been marked by several speculative bubbles on a boom to bust cycle.
Overview
A cryptocurrency bubble is a phenomenon where the market increasingly considers the going price of cryptocurrency assets to be inflated against their hypothetical value. The history of cryptocurrency has been marked by several speculative bubbles on a boom to bust cycle. 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 board member Warren Buffett and several laureates of the Nobel Memorial Prize in Economic Sciences, central bankers, and investors.
2011 booms and crashes
In February 2011, the price of Bitcoin rose to US$1.06, then fell to US$0.67 that April. This spike was encouraged by several Slashdot posts about it. In June 2011, Bitcoin's price again rose, to US$29.58. This came after attention from a Gawker article about the dark web market Silk Road. The price then fell to US$2.14 that November.
2013 boom and 2014–15 crash
In November 2013, Bitcoin's price rose to US$1,127.45. It then gradually declined, bottoming out at US$172.15 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 starting in January 2018. Long Blockchain Corp. is considered a vivid example and textbook example of market euphoria during the 2017 bubble. 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'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, citing the case of BitConnect, a British company which received a cease-and-desist order from the Texas State Securities Board. BitConnect had promised very high monthly returns but had not registered with state securities regulators or given their office address. In November 2018, the total current value 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 reaches a new all-time high of $19,783.06. 22 December 2017: Bitcoin falls 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 depreciates by 12 percent. 26 January 2018: Coincheck, Japan's largest cryptocurrency OTC market, is hacked. US$530 million of the NEM are stolen by the hacker, causing Coincheck to indefinitely suspend trading. The loss is the largest ever so far by an incident of theft. Late March 2018: Facebook, Google, and Twitter ban advertisements for initial coin offerings (ICO) and token sales. 15 November 2018: Bitcoin's total current value falls below $100 billion for the first time since October 2017 and the price of Bitcoin falls to $5,500.
Initial coin offerings
Wired noted in 2017 that the bubble in initial coin offerings (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. In June 2018, Ella Zhang of Binance Labs, a division of the cryptocurrency exchange Binance, stated that she was hoping to see the bubble in ICOs collapse. She promised to help "fight scams and shit coins".
2020–2021 booms
From 8 to 12 March 2020, the price of Bitcoin fell by 30 percent from $8,901 to $6,206. By October 2020, Bitcoin was trading for approximately $13,200. In November 2020, Bitcoin again surpassed its previous all-time high of over $19,000. In early 2021, Bitcoin's price fluctuated wildly, rising to $34,792.47 on 3 January 2021 before crashing by 17 percent the next day and reaching above $40,000 for the first time on 7 January. On 11 January, the UK Financial Conduct Authority 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 total current value. On 14 April, Coinbase, a much hyped crypto exchange, went public on the NASDAQ. Their shares 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, originally created as a joke, increased to 20,000% of value in one year. It then dropped by 93% shortly after. 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 exchange Binance went down amid a market-wide price crash and traders are now seeking justice for their losses. This was partly in response to Elon Musk'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 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 companies to develop more sustainable and efficient Bitcoin mining. After bottoming out on 19 July, 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 cryptos peaked on 7 November 2021 at $67,566.83 and $4,812.09, respectively. The NASDAQ would peak 12 days later on 19 November at 16,057.44. In September, Bitcoin officially became legal tender in El Salvador with many news sources wondering what countries would be next. As of October 2021, China has continued shutting down crypto trading and mining activities. As of October 2024, Tesla has not yet resumed payment with Bitcoin, although they do accept payment with Dogecoin on select items.
2022 crash
After its 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 reported that there was "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".
2025 boom and 2026 crash
After the partial decrease in 2022, the value of Bitcoin rose again, reaching a new all-time high in October of 2025, when it was valued at US$125,835.92. It fell short of the US$200,000 expectation of Standard Chartered analysts, however, leading one analyst to warn of a possible "bitcoin winter". By February 2026 the price of Bitcoin was lower than it had been in 2024. The New York Times called the slide "one of the worst crises in the crypto industry since 2022". Nobel economics laureate Paul Krugman said, "It does feel like we’re seeing a real crisis of faith right now."
Collapse of Terra-Luna
In May 2022, the stablecoin TerraUSD fell to US$0.10. 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 $45 billion of total current value 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. Kwon Do-hyung, the founder of Terra-Luna, became wanted by both South Korea and the United States for his role as the creator of the cryptocurrency stablecoin which was guaranteed by an algorithm rather than with appropriate funds, after the loss of $40 billion by investors. He was arrested in Montenegro in December 2023 and sentenced to 15 years in prison in December 2025 after pleading guilty to wire fraud and conspiracy.
Private litigation in the United States
On 7 January 2022, a class-action lawsuit was filed against EthereumMax alleging it to be a pump and dump scheme with media personality Kim Kardashian, former professional boxer Floyd Mayweather Jr., former NBA player Paul Pierce, and other celebrities also being named in the lawsuit for promoting the Ether cryptocurrency on their social media accounts. On 18 February, the United States Court of Appeals for the Eleventh Circuit ruled in a lawsuit against Bitconnect that the Securities Act of 1933 extends to targeted solicitation using social media. On the same day, a class-action lawsuit was filed against SafeMoon alleging it to also be a pump and dump scheme with professional boxer Jake Paul, musician Nick Carter, rappers Soulja Boy and Lil Yachty, 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 1 April, a class-action lawsuit was filed in Florida against the LGBcoin cryptocurrency company, NASCAR, professional stock car racing driver Brandon Brown, and political commentator Candace Owens 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 13 April, Coinbase received a class-action securities fraud lawsuit from its shareholders for including false and misleading statements and omissions in the registration statement and prospectus of its initial public offering. On 13 June, Binance received a class-action lawsuit from more than 2,000 investors accusing the company of false advertising in promoting TerraUSD. On 17 June, TerraForm Labs 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. On 7 July, Celsius Network received a lawsuit from a former cryptocurrency investment manager alleging the company failed to implement adequate risk management strategies or accounting practices to hedge the firm against cryptocurrency price fluctuations and protect its ability to repay its depositors, and that the company was operating an effective Ponzi scheme. On 21 July, an ex-Coinbase employee and 2 other men were charged with wire fraud 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 2022, Changpeng Zhao, the CEO of Binance, one of the largest crypto exchanges in the world, announced they would be liquidating their holdings in FTX Token (FTT) – about $584 million worth – from when FTX had bought back Binance's stake after Binance had been FTX's first investor. Zhao cited recent revelations, and the announcement followed reports that most of FTX liquidity was based in this coin and was very unstable. Specifically, it came shortly after an article from Ian Allison of CoinDesk on 2 November reporting that Alameda Research, a trading firm affiliated with FTX and also co-founded by FTX CEO Sam Bankman-Fried, held a significant amount of FTT: 40% of Alameda Research's $14.6 billion in assets was FTT token, whether unlocked (their biggest asset), locked or collateral (their third biggest asset). This resulted in a run on FTX resulting in 90% of all FTT being withdrawn even after Alameda CEO Caroline Ellison publicly offered Zhao to buy Binance's FTT at $22 each. The price of FTT fell from $22 on 7 November to under $5.00 on 8 November, an 80% drop. Abracadabra.com's stablecoin "magic internet money" (MIM) also briefly lost its peg to the US dollar for the first time since May 2022. This all resulted in a liquidity crisis with the company unable to pay off the withdrawals. On 8 November, Binance announced plans to buy FTX to save it from collapse. This sent shockwaves through the crypto market and led to a 10% drop in Bitcoin price and a 15% drop in Ether price. The following day, however, Binance immediately withdrew its offer, saying that "the issues are beyond our control or ability to help" and also citing reports regarding mishandled customer funds and alleged U.S. agency investigations" as concerns. Bitcoin and Ether consequently plummeted 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 Chapter 11 bankruptcy protection on 11 November. Almost one year later, Bankman-Fried was tried and convicted of conspiracy and wire fraud including after Alameda Research had used FTX customer funds in violation of the exchange's terms of service.
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