Bitcoins and Bank Runs: Analysis of Market Imperfections and Investor Hysterics

7 Pages Posted: 23 Dec 2017  

Usman W. Chohan

University of New South Wales (UNSW), UNSW Business School; Critical Blockchain Research Initiative (CBRI)

Date Written: December 19, 2017

Abstract

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

Suggested Citation

Chohan, Usman W., Bitcoins and Bank Runs: Analysis of Market Imperfections and Investor Hysterics (December 19, 2017). Available at SSRN: https://ssrn.com/abstract=3090405 or http://dx.doi.org/10.2139/ssrn.3090405

Usman W. Chohan (Contact Author)

University of New South Wales (UNSW), UNSW Business School ( email )

Sydney, New South Wales
Australia

Critical Blockchain Research Initiative (CBRI) ( email )

Islamabad
Pakistan

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