The bubble in cryptocurrency trading is an economic phenomenon characterized by a rapid increase in the prices of digital currencies, followed by a sharp decline in prices. The history of cryptocurrencies has witnessed several speculative economic bubbles, such as:
- *2011*: The price of Bitcoin rose to high levels and then decreased to around $2.
- *2013*: The price of Bitcoin rose to over $1000, then gradually decreased to around $300 in January 2015.
- *2017*: The price of Bitcoin experienced an unprecedented surge, rising to over $19000, then falling by 65% in January 2018.
- *2020-2021*: The price of Bitcoin rose again to over $50000, then fell by 30% in May 2021.
*Reasons for the occurrence of bubbles in cryptocurrency trading:*
- *Speculation*: Speculating on cryptocurrencies can lead to unjustified price increases.
- *Extreme volatility*: Cryptocurrency prices are characterized by extreme volatility, which can lead to astonishing price movements.
- *Irrationality of investors*: The pursuit of wild profits can lead to a specific mentality that does not seek fundamentals and drives prices to unreasonable levels.
*Lessons Learned:*
- *Understanding technologies and business models*: It is essential to understand the technologies and business models of cryptocurrencies before investing.
- *Valuation of projects*: Cryptocurrency projects should be evaluated based on their actual utility, potential adoption, and ability to sustain in the long term.
- *Diversifying investments*: It is important for cryptocurrency investors to diversify their investments to mitigate potential losses.¹ ²
