Original title: Are cryptocurrencies real financial bubbles? Evidence from quantitative analyses
Marco Bianchetti, Camilla Ricci, Marco Scaringi · July 2026
Cryptocurrency prices move mostly because of investor emotions, which can create dangerous financial bubbles that burst into sudden price crashes. The researchers wanted to see if these market peaks really are speculative bubbles. They tested Bitcoin and Ether, two major digital currencies, during a timeline from 1st December 2016 to 16th January 2018. They combined models that track fast-accelerating price waves and statistical tests designed to detect wild market runs. Their tools spotted classic bubble behavior right before major market drops happened. Specifically, Bitcoin showed bubble hallmarks in mid December 2017 and early January 2018, just before large crashes. Ether showed clear bubble behavior in mid June 2017, ahead of its 12th June crash, along with a weaker signal around 12th January 2018 before falling on those same days. The study confirms that excited investors push prices far above their real values, creating critical crash risks.
Imagine you are blowing up a balloon. At first it inflates smoothly, but as you push more air in, the rubber stretches thin and the balloon expands faster with each puff. You know it will eventually pop, but you want to predict when. Here, the price increase of Bitcoin and Ether is like the balloon expanding, and the models detect the moment when expansion becomes dangerously fast, just before the crash.
Cryptocurrency investors face extreme volatility and sudden crashes. This study shows that bubble detection models can identify warning signs days in advance, potentially helping traders avoid losses and regulators monitor market stability. The methods also work for any financial asset, not just crypto.
The abstract doesn't explicitly state limitations, but the study only covers the period December 2016 to January 2018 and tests only two cryptocurrencies. The models may not perfectly predict all bubbles and could generate false signals. The methodology assumes certain price patterns that may not hold in all markets.
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Are cryptocurrencies real financial bubbles? Evidence from quantitative analyses — Marco Bianchetti, Camilla Ricci, Marco Scaringi
Abstract licence: CC0
Explanation generated by Synthesis from the abstract — it is not the original paper. This is a preprint, so it hasn't necessarily been peer reviewed.