When I wrote my first article on the Bitcoin bubble entitled The Great Bitcoin Scam on December 28, 2017, Bitcoin was trading at $15,433.73. As of today, February 9, 2018, about 40 days later, Bitcoin has fallen by more than half and the price is oscillating somewhere between $6,000 and $9,000 depending on the time of day or night. Swings of 10% or greater are sometimes occurring every few hours.
So why has Bitcoin suddenly become more volatile? There is no singular answer, but several. Let's examine the most important ones in turn.
The Cryptocurrency Bubble Has Only Started To Deflate
Although some of us called it at the time, in only a month's retrospect it is crystal clear that investments in crypocurrency had formed a huge bubble. Economist Nouriel Roubini in fact declared it to be the "Mother of all Bubbles", and the largest recorded bubble in history.
Contrary to popular perception, economic bubbles do not collapse completely in a single day as with a balloon popping, but usually take some months to fully deflate. For instance, the 1929 stock market bubble began to deflate as early as September of that year, had massive selloffs in October, but didn't fully bottom until February, 1930. Ditto for the 2008 crash, which started in June of that year, but the market didn't bottom until February, 2009. Very similarly, the dot-com (or, more accurately dot-con) crash which began in the spring of 2000 didn't bottom until almost a full year later. For that matter, even the infamous Tulip Bulb Bubble in 1637 took some months to fully deflate.
All of these bubbles had plenty of "false bottoms", where it looked for a while like the price would creep back up.
If history is to be followed, the cryptocurrency bubble had just started to deflate, and there is still plenty of falling left to do. It is the old joke about the man who jumps from the Empire State Building, and on passing the 80th floor on the way down says, "Well, so far, so good."