Bitcoins and Bank Runs: Analysis of Market Imperfections and Investor Hysterics
7 Pages Posted: 23 Dec 2017
Date Written: December 19, 2017
The “Bank Run” phenomenon in financial market is characterized at least in part by panicked market psychology and a subjacent market fragility, but as this discussion paper notes, the Bitcoin market is also at risk due to unsavvy and uninformed investors, speculative second-order capital, weak regulatory presence, validation lagtimes, illiquidity, a lack of asset insurance, and above all, a high concentration of Bitcoins in but a few hands (the “Whale” phenomenon). This discussion paper raises the question of “bank run” scenarios in the exit case for Bitcoin investors in a panicked situation.
Keywords: Bitcoin, Blockchain, Cryptocurrency, Financial Crisis, Panic, Investor Psychology
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