The 'Bigger Fool Theory' Raised by Blind Faith, Dogecoin Withstood Despite Bitcoin Crash (Comprehensive)

Bitcoin Volatile Amid Negative News and Rumors... Plunges 14%
Most Cryptocurrencies Including Ethereum and Ripple Decline
Dogecoin Rebounds with 9% Rise on Bargain Buying Interest

[Asia Economy New York=Correspondents Baek Jong-min and Lee Hyun-woo] "The 'greater fool theory' is emerging."

David Kimberly, a researcher at UK investment firm Pretrade, warned in an interview with CNBC on the 18th (local time), "The 'greater fool theory,' where investors blindly follow market trends in cryptocurrency investments, is appearing," adding, "If everyone behaves this way, the bubble will inevitably burst, and it is impossible to predict when that will happen."

The greater fool theory justifies any price based on the belief that someone will buy later at a higher price and is often cited to explain real estate price surges. Experts are also using this theory to explain the recent sharp rise in cryptocurrencies such as Dogecoin.

Over the past weekend, major cryptocurrencies including Bitcoin sharply declined amid various negative factors and rumors, while Dogecoin rebounded due to bargain buying, causing the entire market to fluctuate significantly for a short time. The main reason is interpreted as major investors rushing to realize profits amid increased price burdens on cryptocurrencies centered on Bitcoin following Coinbase's recent listing. Experts predict that the market is likely to remain volatile for some time due to the massive liquidity entering the cryptocurrency market.

As of 11 a.m. Eastern Time on the day, Bitcoin's price plunged more than 14% within about an hour from around $59,000 (approximately 65.98 million KRW) to $51,000, marking the largest drop since February. Bitcoin had been fluctuating slightly between $59,000 and $60,000 after surpassing $65,000 on the 14th, buoyed by the news of Coinbase's Nasdaq listing, the largest cryptocurrency exchange in the U.S. Not only Bitcoin but also major cryptocurrencies such as Ethereum (-7.53%) and Ripple (-14.92%) experienced sharp declines.

The sharp decline is mainly attributed to various negative factors surrounding the cryptocurrency market and rumors spreading through social networking services (SNS), which led major investors to switch to massive selling. According to CoinDesk, a cryptocurrency specialized media outlet, mining farms stopped due to a power outage in the Xinjiang Uygur Autonomous Region of China, where the world's largest Bitcoin mining facilities are concentrated. The Turkish government announced its decision to halt cryptocurrency payments.

Additionally, rumors spread mainly on Twitter that the U.S. State Department would track and investigate money laundering by financial institutions using cryptocurrencies, triggering a flood of sell orders. While the U.S. State Department refused to comment on the money laundering investigation rumors to foreign media, a large volume of sell orders worth $300 billion, accounting for 15% of the total market capitalization, poured out from major Bitcoin exchanges worldwide on the day.

However, Dogecoin attracted attention by rebounding even amid the sharp decline. According to CNN, Dogecoin rose more than 9% compared to the same time the previous day, surpassing 40 cents intraday and hitting an all-time high. CNN analyzed that bargain buying flowed into Dogecoin, which is cheaper compared to other cryptocurrencies, and that Tesla CEO Elon Musk, who led Bitcoin's rally, continued to mention Dogecoin on Twitter, influencing the price.