BUSINESS AWARENESS TEST- 1

Cryptocurrency Crash

SUBMITTED TO:
Prof. Sanchari Debgupta

Submitted by:
Aman Goel- A13
Bharat Yadav- A24
Palak Teotia- A44
Saksham Sharma- A54
Naina Batra- A63
 Cryptocurrency Crash
“Cryptocurrency has been the biggest bubble in human history”- Roubini.

The last few years have seen the rise of cryptocurrency in our world economy and each day
since then has been a rollercoaster ride. The only difference is that while 2 months back the
rollercoaster was on its way up, it has now started to descend. Cryptocurrencies such as
Bitcoin became very famous while the lesser known ones such as Litecoin, Ripple and
Ethereum stayed on the side-lines not getting the same limelight as its sister cryptocurrency.

The rise of cryptocurrency had taken everyone by surprise and soon became the new
favourite investment for many citizens who didn’t really understand the concept or liquidity
of the same. In fact, the craze of cryptocurrencies increased so much that Bitcoin was valued
at almost $20,000 somewhere last December. The “value” of other cryptocurrencies didn’t
rise as much but they too did well as compared to their start off position.

2018 brought every cryptocurrency investor back to the ground and not very gently. The
bubble had burst with Bitcoin prices falling as low as $6,000. Many economists had predicted
the bursting of the bubble but the actual impact of it was very high leaving the investors in
great losses. In simple words we can say that if a person had invested $1,000 in Bitcoins, they
would now be valued at around $660, which is a big loss for something that doesn’t even
actually exist.

So, what could be the reason behind this dramatic fall in cryptocurrencies? Many of the
investors say that the spike in 2017 was because of a market manipulation that took place.
India’s Finance Minister didn’t help the cause by declaring in the 2018 budget that India
would not recognise the currency as legal tender and the use of the same would be considered
“illegal activities”. Facebook too has taken to banning all adverts related to cryptocurrency,
which led to the downfall of almost all the cryptocurrencies.

Roubini said, “1,300 cryptocurrencies or initial coin offerings currently in existence were “a
scam”. “Most of them are even worse [than bitcoin] and don’t have any intrinsic value like
bitcoin. So, if bitcoin is a bubble, it’s a bubble to the power of two or three.”

Bitcoin is not recognised by any central bank and currently allows people to bypass banks
and traditional payment methods to pay for goods and services. Banks and other financial
institutions have been concerned about bitcoin’s early associations with money laundering
and online crime, and it has not been adopted by any government.

Although the price has rose again a couple hours after the crash which just adds to the crazy
volatile nature of the currency. So what can we expect from the cryptocurrency phenomemon
in the future? It is a great experiment but the expectation that it must succeed seems to be a
farfetched one. Economists are still sceptical about how the whole mess is actually going to
come under control and the investors are sitting at the edge of their seats, hoping it doesn’t
bring more bad news for them.

Time will tell what investors have in store for them.

Graph of Price fluctuations of Bitcoin (September 2017- February 2018)

( Source: www.coindesk.com/price/)