{
  "title": "Crypto Bubble? An Historical Analysis of Financial Crises",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2018/06/crypto-bubble-historical-analysis-of-financial-crises-adriano",
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  "summary": "Are we in a crypto bubble? Will Bitcoin crash? An analysis of cryptocurrencies through the taxonomy of financial bubbles developed by economist John Kenneth Galbraith.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Article: \"A Short History of Crypto Euphoria\"\n- Author: ANDREAS ADRIANO\n- Publication: F&D Magazine\n- Date: June 2018\n- Focus: Apply John Kenneth Galbraith’s taxonomy of financial bubbles to crypto assets (Bitcoin, ICOs, tokens)."
    },
    {
      "heading": "Galbraith’s criteria applied to crypto assets",
      "content": "- “The thought that there is something new in the world…”  \n  - Crypto evangelists claim novelty: example cited — Remy Hauxley calls Bitcoin “unlike anything we have ever seen. It’ll change the world.” Hauxley calls Bitcoin “a new form of gold, of money, of stocks. It’s a trifecta.”\n- “The extreme brevity of the financial memory…”  \n  - About a decade since the 2008 crisis and almost a generation since the dot-com bubble; many Bitcoin traders are too young to remember those episodes.\n- “The specious association of money and intelligence…”  \n  - Wealth confers adulation, reinforcing imitation and supplying “greater fools” to sustain speculation.\n- “Speculation became more and more intense…”  \n  - Rise of ICOs as the modern analogue to IPOs; tokens often confer no ownership rights.\n  - Block.one has raised more than $1.5 billion since July 2017, despite indications tokens “do not have any rights, uses, purpose, attributes, functionalities and features.”\n  - ICOs raised $6.5 billion in 2017, and more than $4 billion in the first quarter of 2018 (Wall Street Journal).\n  - Many investors flip tokens to others eager to join the race.\n- “All crises have involved debt that has become dangerously out of scale…”  \n  - Leverage exists in crypto markets but overall debt exposure is unclear due to market opacity and minimal bank exposure.\n  - Some crypto exchanges allow investors to borrow as much as 100 times the cash balance in their accounts.\n  - A poll by LendEDU found a growing number of investors use credit cards to buy coins and then carry the balance.\n  - Volatility example: anyone who bought Bitcoin in the last two months of 2017, when the price reached almost $20,000, faced severe losses.\n  - Security risk: since 2011, Reuters reports hackers have stolen almost 1 million Bitcoins (worth over $9 billion in early May) from several exchanges.\n- “The speculative episode always ends not with a whimper but with a bang…”  \n  - Galbraith: bubbles end badly with scapegoating; societies rarely learn from them.\n  - Comparative scale: at their peak, all crypto assets combined were worth less than 1 percent of global GDP, while tech stocks at the height of the dot-com mania were valued at close to a third of global GDP (Bank of England governor Mark Carney)."
    },
    {
      "heading": "Risks, uncertainties, and systemic considerations",
      "content": "- Unknown magnitude of debt/leverage due to opaque, unregulated, early-stage market structure.\n- High individual leverage available (up to 100x) and growing use of credit to finance purchases.\n- Cybersecurity losses: almost 1 million Bitcoins stolen since 2011 (worth over $9 billion in early May).\n- Market-size comparison suggests limited systemic immediate risk: crypto assets < 1 percent of global GDP."
    },
    {
      "heading": "Historical parallels and potential long-term outcomes",
      "content": "- Past bubbles produced both destruction and lasting innovations:\n  - South Sea Bubble, tulip mania, dot-com boom cited as precedents.\n  - Examples of creative outcomes from prior bubbles:\n    - The typewriter became a durable technology.\n    - Amazon (which bought Webvan) and other firms enabled fast grocery delivery despite Webvan’s bankruptcy after burning more than $800 million.\n    - Facebook profited from targeted advertising—the principle AllAdvantage attempted.\n- Author’s assessment: It is too early to say whether crypto assets will have a lasting transformative impact; signs are promising but most bubbles are ultimately destructive of value, wealth, and trust in institutions."
    },
    {
      "heading": "Key statistics and figures (verbatim)",
      "content": "- Block.one has raised more than $1.5 billion since July 2017.\n- ICOs raised $6.5 billion in 2017.\n- ICOs raised more than $4 billion in the first quarter of 2018.\n- Some crypto exchanges allow investors to borrow as much as 100 times the cash balance in their accounts.\n- Bitcoin price reached almost $20,000 in the last two months of 2017.\n- Since 2011, hackers have stolen almost 1 million Bitcoins (worth over $9 billion in early May).\n- At their peak, all crypto assets combined were worth less than 1 percent of global GDP.\n- At the height of the dot-com mania, tech stocks were valued at close to a third of global GDP.\n- Webvan burned through more than $800 million in investors’ money.\n- Facebook made a $16 billion profit in 2017.\n\nSource: F&D Magazine — A Short History of Crypto Euphoria, Andreas Adriano, June 2018.\n\n---\n\n Content in this bundle\n\n- Crypto Bubble? An Historical Analysis of Financial Crises - IMF F&D Magazine\n  - Crypto Bubble? An Historical Analysis of Financial Crises - IMF F&D Magazine (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Crypto Bubble? An Historical Analysis of Financial Crises - IMF F&D Magazine (PDF){rel=\"external\" type=\"application/pdf\"}\n- نبذة تاريخية قصيرة عن فورة الأصول المشفرة\n  - نبذة تاريخية قصيرة عن فورة الأصول المشفرة (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - نبذة تاريخية قصيرة عن فورة الأصول المشفرة (PDF){rel=\"external\" type=\"application/pdf\"}\n- Breve historia de la criptoeuforia ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018\n  - Breve historia de la criptoeuforia ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Breve historia de la criptoeuforia ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Brève histoire de l’euphorie cryptographique\n  - Brève histoire de l’euphorie cryptographique (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Brève histoire de l’euphorie cryptographique (PDF){rel=\"external\" type=\"application/pdf\"}\n- Краткая история криптоэйфории– Финансы и развитие – июнь 2018 года\n  - Краткая история криптоэйфории– Финансы и развитие – июнь 2018 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Краткая история криптоэйфории– Финансы и развитие – июнь 2018 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- 加密热潮简史 - 金融与发展\n  - 加密热潮简史 - 金融与发展 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 加密热潮简史 - 金融与发展 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2018/06/crypto-bubble-historical-analysis-of-financial-crises-adriano"
    }
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    "Authors: ANDREAS ADRIANO",
    "Published: June 1, 2018",
    "Volume: 55",
    "Article: \"A Short History of Crypto Euphoria\"",
    "Author: ANDREAS ADRIANO",
    "Publication: F&D Magazine",
    "Date: June 2018",
    "Focus: Apply John Kenneth Galbraith’s taxonomy of financial bubbles to crypto assets (Bitcoin, ICOs, tokens).",
    "“The thought that there is something new in the world…”",
    "“The extreme brevity of the financial memory…”",
    "“The specious association of money and intelligence…”",
    "“Speculation became more and more intense…”",
    "“All crises have involved debt that has become dangerously out of scale…”",
    "“The speculative episode always ends not with a whimper but with a bang…”",
    "Unknown magnitude of debt/leverage due to opaque, unregulated, early-stage market structure.",
    "High individual leverage available (up to 100x) and growing use of credit to finance purchases.",
    "Cybersecurity losses: almost 1 million Bitcoins stolen since 2011 (worth over $9 billion in early May).",
    "Market-size comparison suggests limited systemic immediate risk: crypto assets < 1 percent of global GDP.",
    "Past bubbles produced both destruction and lasting innovations:",
    "Author’s assessment: It is too early to say whether crypto assets will have a lasting transformative impact; signs are promising but most bubbles are ultimately destructive of value, wealth, and trust in institutions.",
    "Block.one has raised more than $1.5 billion since July 2017.",
    "ICOs raised $6.5 billion in 2017.",
    "ICOs raised more than $4 billion in the first quarter of 2018.",
    "Some crypto exchanges allow investors to borrow as much as 100 times the cash balance in their accounts.",
    "Bitcoin price reached almost $20,000 in the last two months of 2017.",
    "Since 2011, hackers have stolen almost 1 million Bitcoins (worth over $9 billion in early May).",
    "At their peak, all crypto assets combined were worth less than 1 percent of global GDP.",
    "At the height of the dot-com mania, tech stocks were valued at close to a third of global GDP.",
    "Webvan burned through more than $800 million in investors’ money.",
    "Facebook made a $16 billion profit in 2017.",
    "**Crypto Bubble? An Historical Analysis of Financial Crises - IMF F&D Magazine**",
    "**نبذة تاريخية قصيرة عن فورة الأصول المشفرة**",
    "**Breve historia de la criptoeuforia ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018**",
    "**Brève histoire de l’euphorie cryptographique**",
    "**Краткая история криптоэйфории– Финансы и развитие – июнь 2018 года**",
    "**加密热潮简史 - 金融与发展**"
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