‘Dot-Com Era on Steroids’ – Here’s How Bad the $2.2 Trillion Bitcoin and Crypto FTX Price Crash Could Get
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The price of Bitcoin has this week crashed below $16,000, sparking dire warnings that the entire crypto market may be “on the road to oblivion.”
Now, legendary short seller Jim Chanos has labeled the latest bitcoin and crypto crash the “dot-com era on steroids” and predicted that the FTX implosion is just the beginning.
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Bitcoin price has been in a steep downward trend for the past year, and is trending downward … [+]
“Asset prices are the staunchest defense attorney and the fiercest prosecutor of financial fraud,” said Chanos, who famously predicted Enron’s collapse in 2001. Odd Lots podcast in the wake of the FTX deal with Binance that fell apart earlier this month. “It’s only when people start losing money that you start to have a public outcry,” he said, pointing to the combined crypto market cap falling below $800 billion this month from a peak of about $3 trillion 12 months ago.
The dot-com bubble throughout the late 90s and into the early 2000s saw a huge surge in technology and internet company stock prices that caused the tech-heavy Nasdaq index to lose nearly 80% of its value.
“People lost money in the dot-com era for about a year, but it wasn’t until the Enron and WorldCom scandals hit that the federal government really stepped up its efforts to look at corporate wrongdoing,” Chanos said. “This will be the same.”
Last week, world leaders called for “critical” international rules to govern the fast-growing bitcoin and crypto space, saying potential risks to “financial stability” needed to be mitigated. Meanwhile, US Treasury Secretary Janet Yellen said FTX’s fall “demonstrates[s] the need for more effective oversight of cryptocurrency markets.”
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The price of Bitcoin has fallen sharply over the past month as traders and investors count the costs of … [+]
Following FTX’s collapse, serious questions have been raised about the financial health of other major crypto companies.
“People have lost a lot of money on crypto and there’s going to be a political outcry now to regulate this system and bring people to justice,” Chanos said.
However, Chanos does not expect the bitcoin and crypto market meltdown to spread to other aspects of the financial system. “I don’t think this is contagion through the credit markets,” he said.
