Bitcoinmania: A Ticking Time Bomb Waiting to Explode

doi:10.2139/ssrn.3861836

Paper

Bitcoinmania: A Ticking Time Bomb Waiting to Explode

Published Apr 13, 2021 · John Taskinsoy

LSN: Internet Payment Issues (Sub-Topic)

UNKNOWN SJR score

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Abstract

At the time of writing this article, the Bitcoin bomb has exploded; after peaking at $64,863 on 14 April 2021, the value of Bitcoin has plunged 45% to $31,276 on May 21, 2021; consequently, nearly $600 billion of value evaporated from Bitcoin’s market cap, i.e. from $1.182 trillion (April 2021) to less than $600 billion (May 2021). Bitcoin’s high price valuations coincides with its halving dates; aftermath of each halving event has led to a bubble formation within one year and a crash in the ensuing few months after a perceived peak has been achieved. The three previous halving events are a testimony to this fact; after the halving #1 on 28 November 2012 (block reward was reduced from 50 BTC to 25 BTC), price of each bitcoin increased from $76 on 9 July 2013 to a peak of $1,153 on 5 December 2013, an increase of 1,417% (but fell to $177 in January 2015). Following the halving #2 on 9 July 2016 (block reward was reduced from 25 BTC to 12.5 BTC), the price of bitcoin charted a remarkable ascent, from $963 on 2 January 2017 to $20,089 on December 17 in the same year (a surge of 1,986%, followed by a nosedive to $3,557 in January 2018). The halving #3 has been most unprecedented by any stretch of imagination, the value of each bitcoin has skyrocketed from $7,194 on 1 January 2020 to $64,863 on 14 April 2021; however in the subsequent month (May 2021), Bitcoin gave back half of the gain (price reduction of 20% or more could be considered as a major correction). It is important to mention that Blockchain is not confined to Bitcoin and its survival as a revolutionary technology does not depend on cryptocurrencies. Bitcoin and some altcoins may become obsolete, but blockchain will continue to forge ahead unabated as many life-changing inventions have done before.

Study Snapshot

Key takeawayBitcoin's high price valuations coincide with its halving dates, which have led to bubble formation within one year and a crash in the ensuing few months after a perceived peak was achieved.

PopulationOlder adults (50-71 years)

Sample size24

MethodsObservational

OutcomesBody Mass Index projections

ResultsSocial networks mitigate obesity in older groups.

Paper

Bitcoinmania: A Ticking Time Bomb Waiting to Explode

References

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The Internet Bubble, U.S. Housing Bubble, and Cryptocurrency Bubble are examples of irrational exuberance in the 21st century, causing financial crises and highlighting the need for proper policy actions to avoid costly crises.

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Citations

The Impact of Bitcoin Halving Day on Stock Market in Indonesia

The bitcoin halving day did not increase abnormal return on Indonesian stock prices, but trading volume decreased, suggesting investors may have switched to cryptocurrency investments due to the halving day.

Turkey’s Melancholy Economic Indicators Camouflaged by Militarization as a Foreign Policy

Turkey's economic struggles are obscured by its military spending, as the AKP government under President Erdogan has reduced military power and shifted focus to domestic issues.