THE FALL OF THE CRYPTOCURRENCY MARKET

Catalin Dragoi
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Catalin Dragoi: Centre for Financial and Monetary Research “Victor Slavescu”, N.I.E.R., Romanian Academy, Bucharest, Romania

Journal of Financial and Monetary Economics, 2023, vol. 11, issue 1, 154-160

Abstract: Started following the financial crisis of 2008 with the launch of the first virtual currency - bitcoin (launched in 2009), which was followed by the subsequent launch of hundreds and then thousands of other virtual currencies, the value of the crypto currency market has constantly developed attracting an increasing number of participants and which required the development of an increasing number of trading platforms. Cryptocurrency markets are made up of companies that launch virtual currencies, those that trade these currencies and trading platforms. Virtual currency exchanges are similar to stock exchanges, only that they exist exclusively in the online environment and being still at the beginning, they have a relatively short existence time, they are less regulated. Even if the desire of those active in the crypto market "to buy coffee with bitcoin" is far from being achieved because the number of commercial agents that accept payment with cryptocurrencies is limited, most new participants were attracted by the potential quick earnings that the companies launching different virtual currencies promised them, the crypto market grew rapidly reaching a capitalization of almost 3 trillion uds at the end of 2021 and investors' hopes had taken wings, followed by a sudden fall in the markets, in a few months the capitalization reached at less than one trillion usd. The paper aims to analyze what are the main factors that influence the evolution of cryptocurrencies and to explain what was the sum of factors that led to the collapse of the cryptocurrency market in 2022.

Keywords: cryptocurrency; cryptocurrency market (search for similar items in EconPapers)
JEL-codes: E42 G23 O23 (search for similar items in EconPapers)
Date: 2023
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