Three years ago, this column argued the cryptocurrency wasn’t money, resembled the gold prospector’s fabled sardine tin, and faced a total wipeout. Bitcoin promptly shed more than two-thirds of its value. Now it’s back from the dead and trading at twice its peak. What happened?
The pandemic hasn’t just provoked irrational fears; a great speculative fervour also appeared. And the froth of the year of Covid-19 in financial markets exhibits three of the conditions described in Charles Mackay’s classic book on the inflation of speculative bubbles.
As society melts down, markets melt up. The constant manipulation of interest rates has turned the world of finance upside down. Serious investment has become impossible. It’s the sort of topsy-turvy state Lewis Carroll might have imagined if Alice was putting money to work.