Source: ft.com

The history of financial markets is littered with asset price bubbles, from tulips in the early 1600s to more recent examples, such as internet stocks in the late 1990s and US house prices before 2008. The ascent of the virtual currency bitcoin, which recently neared $5,000 and has risen about 350 per cent this year, has so far defied sceptics and delighted its growing ranks of proponents.


When put against a chart of how bubbles develop, the price of bitcoin appears set for a painful reckoning, situated between the mania and bust phases.


Now the market must consider whether the current drop in bitcoin which followed China’s decision to ban Initial Coin Offerings, amounts to a bull trap that presages an eventual bust.



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