BITCOIN has been “crushed” and banks “may have been responsible” for bursting the cryptocurrency bubble after values plummeted in the last week, the chair of the department of economics at Long Island University has claimed.
By JOSEPH CAREY
Panos Mourdoukoutas declared that banks could have been responsible for “making the burst worse than it could have been”.
He explained: “Bitcoin is crushed, losing 38.10 per cent of its value over a seven-day period.
“Ethereum and Ripple are crushed, too, losing 43.23 per cent and 48.14 per cent respectively over the same period.
“Big banks may have something to do with both helping the bubble blow bigger and making the burst worse than it could have been.”
Mr Mourdoukoutas claimed that banks pumped incentives into the virtual currency after realising its potential and created Bitcoin futures by CME.
This “provided the liquidity” that allowed investors to purchase Bitcoins using their credit cards with ease.
He added: “There was a time when Wall Street and big banks provided a tailwind for Bitcoin, Ripple, Ethereum, and other cryptocurrencies.
“That was back in the last quarter of 2017, when Wall Street began to recognise Bitcoin as an investment and was creating the vehicles and mechanisms for broader market participation in it. Like the introduction of Bitcoin futures by CME.
“Meanwhile, big banks provided the liquidity for such broad participation by allowing investors to use their credit cards to pay for cryptocurrency purchases – and help the cryptocurrency bubble grow bigger and bigger.”
The expert detailed that 18.5 per cent of people have used credit cards to purchase the cryptocurrency.
After 22.13 per cent of people that used credit cards to gain access to the rising Bitcoin market, banks began to cut off liquidity to virtual currencies, he declared.
He went on: “How many investors have used their credit cards to buy Bitcoin? It is 18.15 per cent.
“And 22.13 per cent of those investors who used credit cards to fund their Bitcoin purchases didn’t pay off their credit card balance after purchasing Bitcoin.
"Now, big banks are cutting off liquidity to the cryptocurrency markets, when they need it the most; and, perhaps, turning a cryptocurrency correction into a crash.
“To be fair, banks have a legitimate concern regarding the ability of cryptocurrency investors to pay their credit card balances after the big fall in cryptocurrency prices.
“But they shouldn’t have lent money to investors to purchase such high-risk assets in the first place and make the bubble worse than it might have been.”
However, the director of communications at Holochain, Matthew Schutte, stated that bank collusion was not needed to “pop the Bitcoin bubble”
He said: "No collusion amidst Wall Street firms or Banks was needed to pop the Bitcoin bubble.
“Of course, it didn't help either when research reports surfaced pointing out that there was little chance that Bitcoin will replace money for ordinary exchanges thanks to transaction fees in the tens of dollars and settlement times that work fine…for anybody willing to watch a Netflix show while waiting for their payment to go through."