Are cryptocurrencies just another asset bubble?

Executive Summary

Transformative technology? Asset bubble about to pop? Garden-variety fraud? Bitcoin and other cryptocurrencies have no shortage of fans and detractors, and there is no lack of opinions about how real the phenomenon is – but they have caught the world’s attention, at least for the moment. Bitcoin was invented by libertarians who wanted to circumvent governments and financial institutions by creating a currency that was anonymous and untraceable. But the speculative frenzy that surrounded it, of a kind once reserved for hot tech IPOs, took off in earnest in 2017: Bitcoin’s price shot up to more than $19,700 in December, then fell in January almost as steeply as it had risen. Bitcoin uses a technology called blockchain, a public digital ledger run by computers that promises to be both transparent and unhackable. Even bitcoin critics call blockchain an innovative technology that could have wide applications in many areas of the economy.

Some key takeaways:

  • Bitcoin’s rise has spawned more than 1,300 rival cryptocurrencies, some of which seek a competitive edge against it by offering greater anonymity or faster processing speeds.

  • While free from government and its regulation, cryptocurrencies offer no investor protection on investments that have been subject to great market volatility.

  • Cryptocurrencies are not widely held and attract a criminal element because of their offer of anonymity, making the market potentially vulnerable to manipulation.

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Resources for Further Study



Narayanan, Arvind, et al., “Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction,” Princeton University Press, 2016. Professors from Princeton, Stanford and the University of Maryland provide a comprehensive introduction to the revolutionary technologies of digital currency.


Angel, Jim, “Approving bitcoin ETFs will lead investors to slaughter,” The Hill, March 7, 2017, A Georgetown University business professor argues against the approval of bitcoin-based exchange-traded funds (ETFs).

Bustillos, Maria, “The Bitcoin Boom,” The New Yorker, April 1, 2013, In an age of mistrust of institutions, a writer argues that bitcoin is becoming an attractive alternative to banks and fiat currencies.

Cuthbertson, Anthony, “North Korea Hacking War on Bitcoin Exchanges Is Part of ‘Biggest Global Sting,’” Newsweek, Dec. 19, 2017, Cybersecurity researchers accuse North Korea of stealing bitcoins to offset negative effects of international trade sanctions.

DeRousseau, Ryan, “There’s a Hidden Bitcoin Tax You Need to Know About,” Money magazine, Nov. 2, 2017, Many people do not realize that the Internal Revenue Service considers bitcoin property and therefore sales are subject to capital gains taxes, a tax lawyer says.

Galland, David, “5 Industries That Blockchain Will Likely Disrupt by 2020,” Forbes, March 29, 2017, A partner in an investment firm writes that the real value of bitcoin may be in the technology behind it and the uses it has for other industries.

Greenberg, Andy, “Monero, the Drug Dealer’s Cryptocurrency of Choice, Is on Fire,” Wired, Jan. 25, 2018, A journalist writes that as bitcoin is better tracked by the authorities, other cryptocurrencies rise to take its place as the currency of choice of criminals and terrorists.

Kharif, Olga, “The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market,” Bloomberg Businessweek, Dec. 8, 2017, One of the biggest dangers of the bitcoin market may be that the assets are very closely held by a handful of investors, many of whom are now billionaires, say market watchers.

McMillan, Robert, “The Inside Story of Mt. Gox, Bitcoin’s $460 Million Disaster,” Wired, March 3, 2014, Mt. Gox was the biggest bitcoin exchange – until alleged hackers stole 850,000 bitcoins.

Popper, Nathaniel, “How the Winklevoss Twins Found Vindication in a Bitcoin Fortune,” The New York Times, Dec. 19, 2017, A journalist profiles the brothers, who made a fortune by investing a settlement with Facebook in bitcoin and are now are among the biggest cryptocurrency proponents.

Rosic, Ameer, “What is Blockchain Technology? A Step-by-Step Guide for Beginners,”, February 2017, Blockchain technology is explained for the non-technologist.

Seidel, Marc-David L., “Bitcoin is making banks nervous. Here’s why,” Agenda, World Economic Forum, Oct. 6. 2017, A professor of entrepreneurship explores why the philosophy behind bitcoin and other cryptocurrencies is such a threat to the financial establishments.

Wu, Tim, “The Bitcoin Boom: In Code We Trust,” The New York Times, Dec. 18, 2017, A Columbia University law professor explains the deep mistrust of institutions and other humans that make cryptocurrencies’ reliance on technology so attractive.

Reports and Studies

Nakamoto, Satoshi, “Bitcoin: A Peer-to-Peer Electronic Cash,” Satoshi Nakamoto Institute, Oct. 31, 2008, This is the original white paper that started bitcoin and the cryptocurrency boom.

The Next Step

Jasper Project

Clay, Melanie, “Canada Should Listen to UK Treasury’s Questions About Digital Currency Investing,” Coinsquare, Feb. 26, 2018, Canada should pay attention to the questions that the United Kingdom is asking about investing in cryptocurrencies, argues a Coinsquare writer.

Ligaya, Armina, “Canadian Securities Exchange to launch blockchain-based clearing house,” The Toronto Star, Feb. 13, 2018, The Canadian Securities Exchange’s plan to create a blockchain-based securities trading platform challenges another initiative called Project Jasper that the TMX Group is developing with the Bank of Canada and Payments Canada.

Wilkins, Carolyn, “Project Jasper: Lessons From Bank of Canada’s First Blockchain Project,” Coindesk, May 19, 2017, The first six months of testing on Project Jasper show that a distributed ledger technology could be used in the private sector, says the senior deputy governor of the Bank of Canada.

Satoshi Nakamoto

Al Ali, Nour, and Chris Kingdon, “Musk: I Am Not Bitcoin’s Satoshi Nakamoto,” Bloomberg, Nov. 28, 2017, Tech mogul Elon Musk denied that he founded Bitcoin after a Medium blog post made a speculative claim to that effect.

Brandom, Russell, “Self-proclaimed Satoshi Craig Wright is being sued for stealing his partner’s bitcoin,” The Verge, Feb. 26, 2018, Craig Wright, who claimed in 2016 that he was the secretive bitcoin founder, is being sued for bitcoin theft by the estate of his deceased former partner in a bitcoin-mining venture.

Wile, Rob, “Bitcoin’s Mysterious Creator Appears to be Sitting On a $5.8 Billion Fortune,” Money Magazine, Oct. 31, 2017, Whoever Satoshi Nakamoto actually is, the mysterious founder of the original virtual currency is sitting on holdings of 980,000 individual bitcoins, according to research by the head of a cryptocurrency firm.


American Cryptocurrency Association
Association dedicated to bitcoin advocacy and dissemination of bitcoin news.

The Bitcoin Foundation Inc.
1 Ferry Building, Suite 255, San Francisco, CA 94111
Organization dedicated to educating the public and media about the benefits of bitcoin and its technology.

Chamber of Digital Commerce
Trade association and political action committee working on behalf of digital commerce and technology innovations, such as blockchain.

DC Blockchain Innovation Center
1133 15th St., N.W., 12th Floor, Washington, DC 20001
Blockchain innovation center created by the Chamber of Digital Commerce.

Global Blockchain Business Council
1440 G St., N.W., 9th floor, Washington, DC 20005
A group that seeks to advance understanding of blockchain technology and promote its adoption.

Wall Street Blockchain Alliance
Trade association working to guide and promote comprehensive adoption of distributed ledger technology across financial markets.

DOI: 10.1177/237455680409.n1