Oxygen, Fuel and Heat: Crypto's Latest Bust and the History of Manias

Table of Contents

TL;DR

• Crypto’s latest boom has turned to bust. Bitcoin is about a third below its October 2025 record, ether about half below its August 2025 record, and the whole market has shrunk by about a quarter in a year.
• It has happened before. Bitcoin lost more than three-quarters of its value in both 2017–18 and 2021–22, and small investors who arrived late tended to lose money.
• The speculation has moved rather than gone away. Trading on the big exchanges has slowed, while prediction markets have hit record volumes and billions have flowed into crypto lending that promises a yield.
• Irish savers are part of the story. In a 2024 survey, about one adult in ten owned crypto, twice the share in investment funds.
• The bubble triangle is a test, not a forecast. All three sides are still present, which the triangle treats as necessary for a bubble but not enough on its own.

How far has crypto fallen, and how fast?

Markets have stories of easy riches, which draw in professionals as well as first-time buyers. In Boom and Bust: A Global History of Financial Bubbles, William Quinn and John D. Turner explain when such a story turns into a bubble, using what they call a bubble triangle.¹ Like a fire, a bubble needs three things at once (i.e. the three sides of the triangle). Marketability, meaning how easily an asset can be traded, is the oxygen; money and credit, the cash and borrowing available to chase it, is the fuel; and speculation, trading in the hope of a quick gain, is the heat. The spark to ignite this fire is usually a new technology or a change in government policy.¹ Crypto brought with it new underlying technologies that reach far beyond digital currencies and ownership, and trading on apps around the clock supplied the oxygen. Let’s explore where, in the long history of manias, crypto’s latest boom and bust sits.

Bitcoin, the largest cryptocurrency, reached a record of $126,080 during trading on the 6th of October 2025.² In 24 hours over the 10th and 11th of October, FT Alphaville reported, $388bn was wiped off the market value of the 100 largest cryptocurrencies, excluding stablecoins, with most of the top coins falling by about a fifth.³

The fall then slowed, but continued. Bitcoin’s lowest daily price of the past year was $58,566 on the 1st of July 2026, 53.5% below its record from October 2025.² Ether, the second-largest coin, fell 68.3% from its record of $4,946 on the 24th of August 2025.² At the Coinbase close on the 20th of October 2026, bitcoin was about a third below its intraday record and ether about half below its own.⁴² Over the year from the 21st of October 2025 to the 21st of October 2026, bitcoin fell about 23% and ether about 36%.²

The whole market has shrunk with them: the market capitalisation of all cryptocurrencies is about $2.8–2.9tn, down about a quarter on a year ago, and bitcoin makes up close to 60% of it.²

Crypto’s past busts, and who got burned

We have seen major drawdowns (falls from a peak to a later low) at least twice in bitcoin’s short history. It fell 83.8% from $19,650 on the 16th of December 2017 to $3,183 on the 15th of December 2018, and 76.7% from $67,510 on the 8th of November 2021 to $15,756 on the 21st of November 2022.⁴ Each time, bitcoin first lost more than three-quarters of its value before climbing back.⁴ It took almost three years to reach its earlier peak after the 2017 bust, and over two years and three months after the 2021 one.⁴ The current fall, a peak-to-trough drawdown of 53.5% from the record to the July low, has been shallower so far.⁴²

In crypto’s past busts, the losses were mostly taken by small investors who arrived late. A study from the Bank for International Settlements (BIS) found that in nearly all the economies it covered, most app users lost money on bitcoin, and almost three-quarters downloaded an app after prices had already risen, when bitcoin was above $20,000.⁵ The median investor put in $900 and was down $431 by December 2022, a loss of about 48%.⁵ After the Terra/Luna turmoil and FTX in 2022, the largest holders, also known as whales, sold while smaller investors kept buying.⁵

Greenwood and others looked at sharp run-ups in stock-market industries, in the US from 1926 to 2014 and internationally from 1985 to 2014.⁶ They defined a crash as a 40% fall within two years. After an industry beat the market by 100% over two years, the chance of a crash was about 53%, against 14% at any time.⁶ Yet sharp rises did not reliably predict lower average returns, which suggests betting against a bubble is hard.⁶ Applying the same 40% test to crypto, bitcoin’s 83.8% and 76.7% drawdowns would count as crashes,⁴ as would its 53.5% fall in under a year and ether’s 68.3%,² all well past the 40% line.

Crypto rallies seem to feed on themselves. Part of it is that, in crypto, attention can push prices further. Liu and Tsyvinski found that crypto returns had no exposure to the factors that drive shares, the economy, currencies or commodities, but followed momentum and attention.⁷ A typical-sized rise (one standard deviation) in Google searches for “Bitcoin” predicted a 2.3% return over the following two weeks.⁷

Where has the speculation popped up now?

As in a game of Whac-A-Mole, speculation surfaces somewhere new, though here the hammer swings in only a few places.

Start with the oxygen: on the big centralised exchanges, spot trading was about $30bn a day in September, down 20% from January.⁸ The Financial Times reports that shares in the listed exchanges Coinbase and Bullish have nearly halved, and Gemini’s are down 82%.⁹ Some trading has moved to decentralised exchanges, whose spot volume reached nearly $200bn in September.⁸

The heat, meanwhile, has moved on. Prediction markets let people trade contracts that pay out depending on whether a future event happens. In September, trading on Kalshi exceeded $59bn, a record, while Polymarket’s US platform recorded $8.7bn and its global platform $4.3bn: about $72bn in all, according to The Block.⁸ The FT, using The Block’s data, reports that volumes have risen from $17bn in January, an increase of more than 300% this year, as crypto exchanges race to offer prediction markets to US customers.⁹ Yet Polymarket’s global monthly active traders are more than 60% below their March 2026 peak.⁸

What might the market be missing?

The legal ground under the new heat is shifting. On the 4th of August 2026, a US federal judge ruled that Utah can enforce its gambling ban against Kalshi, finding that federal commodities law does not override it.¹⁰

The fuel has not gone away either. One fast-growing corner of crypto lending is the crypto vault, a pool where depositors place coins that are lent out or put into strategies to earn a return. The FT, citing data from Blockworks, reports more than $10bn in vaults, up from $4bn at the start of 2025.¹¹ The US Securities and Exchange Commission (SEC) said in July it was examining whether vaults fall under securities laws.¹¹

Separately, coins can disappear outright through hacks. TRM Labs counted a record 207 crypto hacks in the first half of 2026, up from 83 a year earlier, though losses fell to $972m from $2.3bn.¹² Binance said it was hacked on the 29th of October 2026 and put the loss at $6.3bn, about six and a half times TRM’s total for all 207 hacks in the first half.¹³ This is an example of custody risk, which is the risk of losing assets (even digital ones) that someone else holds for you, on top of price risk, and any cover depends on an exchange having the reserves.¹³

How much crypto do households actually hold? In a European Central Bank (ECB) survey of November 2024, 9.7% of households in selected euro area countries owned crypto, slightly fewer than in November 2022.¹⁴ Most held small amounts: 54% of holders had less than €1,000 and 91% less than €20,000.¹⁴ In all, households held at least €75bn, about 0.23% of their financial assets.¹⁴ The survey predates the October 2025 peak.¹⁴

A Central Bank of Ireland survey of 3,020 adults, carried out in May and June 2024 and published in December 2025, found that 10% of Irish adults owned crypto, twice the share with investment funds.¹⁵ Of crypto owners, 44% were aged 18 to 34 and 74% were men; half had started within the previous two years, and the average original stake was €2,266.¹⁵ That is just over a month’s pay at the 2024 national minimum wage of €12.70 an hour (about €2,064 a month gross at 37.5 hours a week).¹⁵¹⁶ Some 15% regretted it because of a loss, and 92% invested online.¹⁵

What does the triangle tell us now?

Quinn and Turner stress that the three sides are necessary but not sufficient, and that some speculation is always present.¹ On the evidence above, crypto’s triangle is still complete, though its sides have shifted. The oxygen is thinner on the big exchanges but still flows through decentralised venues, the heat has rotated into event contracts,⁸ and the fuel is still there in vault lending.¹¹ History adds that sharp rises raise the odds of a crash,⁶ and that small investors who arrive late have borne most of the losses in crypto’s past busts.⁵

The conclusion is that crypto’s 2025–26 boom and bust looks less like an exception and more like another turn of the bubble triangle. Each side is still present, with the newest flames in prediction markets and vaults rather than the coins themselves. None of this says when, or whether, prices will rise or fall next. It does offer a three-part way to read any hot asset: how easy it is to trade, how much borrowed or yield-seeking money is behind it, and how much of the demand is about a quick gain.

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