There have been many criticisms leveled against Bitcoin since it took a sudden rise from its price point to near $20,000. The high rate of volatility in the market has made people likened the digital asset to some investible assets that surged in price and later crashed in previous years. This article will take you through three famous crashes in investment history.
The South Sea Bubble
In 1711, the South Sea bubble was formed and registered as a private-public partnership. One of the primary reason for its establishment was to consolidate and reduce the national debt. The company was promised to have a monopoly in the South Sea and the surrounding Islands. The directors hyped the company to attract more people to invest. In 1718, King George I of Great Britain became the governor of the company. The company recorded an incredible growth and started paying 100% interest to investors. By 1720, the company shares had surged from £128 to £1050. In the last quarter of the year, they crashed down to £124 causing a lot of people to lose their entire money. A commission was established to investigate this crash, and it was revealed that some ministers had taken a bribe to cause speculations.
Japan Real Estate and Stock Market
The Japanese yen rose by 50% in the early 1980s. The economy was affected and underwent a massive recession in 1986. In order to save the economy, the government employed a fiscal and monetary policy which got the economy back on track. From 1985 to 1989, massive speculation started regarding the positive signals that came with economic measures. The Japanese stock and the urban land value tripled between these years. Between this period, the value of the Imperial Palace grounds in Tokyo was much higher than the real estate of the whole of California state. The high growth rate which was classified as a bubble eventually crashed in 1990.
Dot-com is one of the famous crash in investment history. From 1995 to 2000, there was a massive internet usage and adoption rate which gave much value to most of the internet companies. Speculations also pushed the value even further until most of these companies reached their peak on March 10, 2000, and crashed. Companies such as pets.com, Boo.com, and Worldcom failed miserably. The crash affected Cisco which lost its stock value by 86%. Companies like eBay and Amazon were all affected by the crash, but fortunately, they recovered.
From the above-listed crashes in the investment world, it can be told that Bitcoin can undergo a massive crash as well. However, it may either vanish like the Pets.com or recover like eBay. Also, it appears that Bitcoin may not crash completely at all depending on what the future will bring.