What's Behind Bitcoin's Recent Tumble?

Summary

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WSJ Your Money Briefing

Episode: What’s Behind Bitcoin’s Recent Tumble?

Date: November 14, 2017
Host: JR Whalen, with Anne Marie Fertoldi
Guest: Paul Vigna (Wall Street Journal Cryptocurrency Reporter)

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Episode Overview

The episode addresses the sharp drop in Bitcoin’s value during November 2017—a more than 25% fall following its climb to nearly $8,000. Host JR Whalen and reporter Anne Marie Fertoldi talk with WSJ’s Paul Vigna about the causes behind the volatility, broader trends in cryptocurrency, regulatory developments, and public perceptions shaping Bitcoin’s future.

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Key Discussion Points

1. Bitcoin Fundamentals and Market Volatility

• What is Bitcoin?

  • “Bitcoin is a digital currency that was launched about nine years ago… The real difference between bitcoin and currencies that we're all used to is that the monetary systems we're all used to are maintained and backed by the government. Bitcoin is not.” — Paul Vigna [01:10]

• Volatility Context:

  • 25% price swings are “not an unusual move” for Bitcoin, given its thin and relatively new market structure.
  • “A 25% pullback for Bitcoin can happen in a morning for absolutely no reason… It is a much more volatile market. It can move up and down much more. 25% for the S&P 500 in a day would be historic… For bitcoin, that's not an unusual move in four days.” — Paul Vigna [01:50]

Memorable Moment

• Anne Marie Fertoldi jokingly points out this was the "Fifth time this year" such a drop happened [02:31], highlighting how frequent volatility is.

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2. Regulation, Global Influence, and Market Expansion

• The Role of Regulation & Financial Services:

  • Interest from traditional financial sectors is growing, and future regulation may follow as the ecosystem matures.
  • “What you're seeing in financial services is an increasing interest in this asset that is going up at such a rate… What that should lead to is increased interest or at least access among consumers.” — Paul Vigna [03:04]

• Impact of China and Shifting Volume:

  • Recent Chinese government crackdowns on bitcoin exchanges and ICOs dramatically reduced China’s share of global Bitcoin trade, shifting trading to Japan and South Korea.
  • “China, which about a year ago represented north of 90% of all Bitcoin trading volume, now is…no more than fourth or fifth largest now.” — Paul Vigna [04:16]

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3. Internal Divisions: Forks and the Bitcoin “Civil War”

• Bitcoin Splits, Forks, and Fighting Factions:
  • There are competing visions: one wants Bitcoin as a payments network (rivaling Visa, MasterCard, PayPal), and another prefers it as “digital gold” (a store of value).
  • “What happened is that dissident group that was ready to split bitcoin started to trade this other version of bitcoin, this bitcoin cash…you had this huge run up in bitcoin cash. At one point, the value had quadrupled and you had a fall in bitcoin… Essentially what you have is a fight between these two groups.” — Paul Vigna [05:21–07:15]

Notable Quote

“Everything we're talking about right now with the price moves and everything is really these two sides pushing and pulling against each other.” — Paul Vigna [07:15]

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4. Bitcoin as Currency and Volatility Concerns

• Currency vs. Asset:
  • Rapid value changes unsettle those viewing Bitcoin as a currency.
  • “A dollar bill in your pocket is always worth a dollar, but a 25% drop, that's got to be really unsettling.” — JR Whalen [07:27]
  • “A bitcoin is always a bitcoin… it's just a matter of what will the market pay for it in terms of dollars.” — Paul Vigna [07:44]

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5. Is Bitcoin a Bubble?

• Bubble Talk:
  • Even industry leaders (e.g., Credit Suisse’s CEO) call Bitcoin a potential bubble.
  • “It's also probably the fourth or fifth major bubble bitcoin has been in…Most of this is still speculative buying…not based on a lot of fundamentals. So in that sense, you can say it's a bubble, but it's still…very small compared to any other financial bubble in history.” — Paul Vigna [08:41–10:09]

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6. The Rise of Bitcoin Futures & Wall Street Involvement

• Mainstream Integration:
  • Major financial players plan to launch bitcoin futures, allowing new ways to both invest in and hedge against Bitcoin.
  • “What's interesting about it is there are bitcoin exchanges that exist…but now we're talking about the CME Group starting to trade bitcoin futures… That is what could bring in some institutional money, some traditional money and into the market…you will, for the first time, give people the opportunity to actually bet against bitcoin.” — Paul Vigna [10:22]

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7. Bitcoin’s Brand, Public Understanding, and Viral Spread

• Lack of Centralized Marketing:

  • “Bitcoin as a brand doesn't really exist. There's no company pushing bitcoin…The way bitcoin is going to grow is going to be completely viral…it's going to be more people that pick it up and use it and…start recommending it to their friends and talking about it online. That's how it's growing and that is how it's going to continue to grow.” — Paul Vigna [11:55]

• Generational Awareness:

  • Anne Marie Fertoldi points out millennials may not understand bitcoin as much as assumed; Vigna notes the same applies to Gen Xers [11:33–13:00].

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8. The Outlook: Here to Stay?

• Is Bitcoin Going Away?
  • “This technology has way, way too much potential for it to fade away.” — Paul Vigna [13:36]
  • “The idea that you can move money anywhere around the globe as fast as you can send an email is an unbelievably enticing prospect for the global economy.” — Paul Vigna [13:36]

Memorable Closing Joke

“What you're going to have to say is the check is caught in your spam filter.” — Paul Vigna, joking about instant crypto payments vs. “the check is in the mail” [14:20]

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Notable Quotes & Timestamps

• On Volatility:
  “A 25% pullback for Bitcoin can happen in a morning for absolutely no reason.” — Paul Vigna [01:50]

• On Market Structure:
  “This is still a relatively thin market. It is still a relatively new market.” — Paul Vigna [01:53]

• On Forks and Bitcoin Civil War:
  “You had, earlier this year, really like a splinter group of bitcoin dissidents who took the software…they called it bitcoin cash and they launched it in August.” — Paul Vigna [05:36]

• On Market Perception and Bubble Status:
  “Most of this is still speculative buying…not based on a lot of fundamentals. So in that sense, you can say it's a bubble, but it's still…very small compared to any other financial bubble in history.” — Paul Vigna [10:05]

• On the Future:
  “This technology has way, way too much potential for it to fade away.” — Paul Vigna [13:36]

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Timeline of Key Segments

| Timestamp | Segment | |-----------|---------------------------------------------------------------------| | 00:39 | Introduction, context for Bitcoin’s wild price moves | | 01:10 | Paul Vigna explains what Bitcoin is | | 01:50 | Bitcoin’s volatility vs. traditional assets | | 03:04 | Regulatory trends and market expansion | | 04:16 | Impact of Chinese regulatory crackdown | | 05:21 | Forks, Bitcoin Cash, and the Bitcoin “civil war” | | 07:27 | Concerns about usability as currency due to price swings | | 08:41 | Is Bitcoin a bubble? | | 10:22 | Launch of bitcoin futures and Wall Street involvement | | 11:33 | Discussion of bitcoin’s brand and public understanding | | 13:36 | Outlook on Bitcoin and cryptocurrencies’ long-term prospects | | 14:20 | Clever joke on instant payments and “the check is in the mail” |

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Conclusion

• Bitcoin’s wild volatility remains a hallmark of its immature status as an asset and currency.
• The internal “civil war” between competing visions continues to drive swings and uncertainty.
• Traditional financial players, regulations, and global shifts in trading power are shaping the asset’s future.
• Despite speculation and bubble talk, the underlying technology’s potential ensures cryptocurrency will stick around, even if Bitcoin’s ultimate form is still evolving.

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Recommended Reading (per Paul Vigna):

• The Age of Cryptocurrency (2015)
• The Truth Machine (coming February)

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Transcript

[Small Business Owner 1]

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[Narrator/Announcer]

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[JR Whalen]

Welcome to YOUR Money Matters. I'm JR Whalen with Anne Marie Fertoldi in New York. To say that bitcoin has had a volatile November would be putting it lightly. After its value raced up to nearly $8,000 in recent weeks, the cryptocurrency lost more than 25% in days up to and including the second weekend of the month. Has bitcoin seen its day in the sun come and go? Wall Street Journal cryptocurrency reporter Paul Vigna joins us to discuss. Paul, let's just bring everybody up to speed for just a moment on exactly what bitcoin is.

[Paul Vigna]

Sure. Bitcoin is a digital currency that was launched about nine years ago. And the real difference between bitcoin and currencies that we're all used to is that the monetary systems we're all used to are maintained and backed by the government. Bitcoin is not. Bitcoin is basically a computer system that has a series of incentives built in for people to maintain it on their own. What you end up with is basically a peer to peer network for exchanging value. Peer to peer.

[Anne Marie Fertoldi]

Paul, I guess it's not a surprise that bitcoin pulled back after such a dramatic run up, but did a 25% pullback surprise you?

[Small Business Owner 2]

No.

[Paul Vigna]

A 25% pullback for Bitcoin can happen in a morning for absolutely no reason. I think the thing people have to keep in mind with bitcoin is that this is still a relatively thin market. It is still a relatively new market. It does not have any of the kinds of circuit breakers or hedges built in that traditional markets have. It is a much more volatile market. It can move up and down much more. 25% for the S&P 500 in a day would be historic. Has never actually happened in 87, I think it was a 22% drop for the S and P. For bitcoin, that's not an unusual move in four days. It really isn't.

[Anne Marie Fertoldi]

Fifth time this year. Something like that's Happened.

[Paul Vigna]

Yes, exactly right. Bitcoin moves up and down like this a lot, especially given that it was up 7 or 800% at the top when it was close to 8,000. No, it was not an unusual move, Paul.

[JR Whalen]

We're still in the wild west when it comes to digital currency like bitcoin. It's essentially open source software, volunteer developers and like you said, a peer to peer network. More regulation, it seems might be coming down the road. But what do you think might speed that up?

[Paul Vigna]

Well, I think what's going to come down the road as fast, if not faster than regulation, is an expansion of the market. What you're seeing in financial services is an increasing interest in this asset that is going up at such a rate. You're starting to see companies that are hearing from their clients, they're saying, what is bitcoin? Should I buy bitcoin? Should I hold bitcoin? You're starting to see interest from Wall street in building out products that can tap into this on the other end. And this is a pretty important development. This year in Japan, they put in some rules and regulations around bitcoin and bitcoin businesses and that has spurred a lot of trading and a lot of experimenting. You're starting to see on the financial services side, you're starting to see interest. On the regulatory side, like you said, jr, you're starting to see interest. What that should lead to is increased interest or at least access among consumers. That's the big cycle that we're in right now. Consumers, financial services, regulators, all kind of coming in one big swoop. That's what you're looking at right now.

[JR Whalen]

And China spooked the market also.

[Paul Vigna]

Yes, China has been over the last 12 months or so increasingly cracking down on bitcoin. They allowed it to exist for a long time. They were not taking much of an interest in it. Now they put the clamps on their exchanges. They put their clamps on a new fundraising method that's related to bitcoin called the initial coin offering. Companies are creating bitcoin like tokens and offering them up for sale. China cracked down on that. China, which about a year ago represented north of 90% of all Bitcoin trading volume, now is virtually, I don't know offhand what it is, but it's no more than fourth or fifth largest now. China has really put the clamps down, but all that has really done has driven that activity to other countries. Japan and South Korea especially have become huge markets for bitcoin.

[Anne Marie Fertoldi]

Now, Paul, in the days since the most Recent drop, Bitcoin's value recovered somewhat, but there are still some major points of uncertainty that are sparking concern. For one, plans to split bitcoin were suspended. Can you explain what exactly happened there?

[Paul Vigna]

Sure. What's happening now in bitcoin is that it has grown to the point where you have different people within the industry who have different visions of what bitcoin should be. And they've been arguing for the past couple of years about that. What has happened is that it has become such a sort of personal fight between these groups that they're at the point where they really just cannot agree on a common vision of bitcoin anymore. You had, earlier this year, really like a splinter group of bitcoin dissidents who took the software because like we said, bitcoin is open source software. Anybody can take that code, reconfigure it to their own specifications or own desires, and launch it as a separate program. So you had a group of bitcoin dissidents, they did that. They called it bitcoin cash and they launched it in August. You had another group that was ready to split bitcoin itself, and that was supposed to happen this November. There was an agreement to do that, but then the agreement broke down. So the two sides again were fighting and one side backed down. So you didn't get a split of bitcoin itself, but what happened is that dissident group that was ready to split bitcoin started to trade this other version of bitcoin, this bitcoin cash. So over the weekend, you had this huge run up in bitcoin cash. At one point, the value had quadrupled and you had a fall in bitcoin. And what you're seeing is in the market, you're basically seeing this push and pull between these two different groups. One wants bitcoin to be a payments network, to be kind of a competitor. Visa, MasterCard, PayPal, any of those. The other wants bitcoin to move slower and to be more of a place where you will park your assets, park your value, a store of value, kind of like a digital gold. Essentially what you have is a fight between these two groups. The one that wants bitcoin to be a payment system and the one that wants bitcoin to be gold. Everything we're talking about right now with the price moves and everything is really these two sides pushing and pulling against each other.

[JR Whalen]

What's really unsettling for a lot of people I think, is that yes, it could be a payment system, and yes, it's A form of currency, but it's curr that changes value. A dollar bill in your pocket is always worth a dollar, but a 25% drop, that's got to be really unsettling.

[Paul Vigna]

I mean, a bitcoin is always a bitcoin. It's just what is it trading against? I mean, the dollar changes in value against the euro, against the yen. Bitcoin does the same thing against the dollar. I mean, one bitcoin in my digital wallet is still one bitcoin. It's just a matter of what will the market pay for it in terms of dollars. But your point is well taken. Bitcoin as a currency is still something in its infancy. It is still, like you said, it's very volatile. So it is an issue in terms of whether this can actually operate as a currency that we're used to.

[JR Whalen]

We're speaking with the Wall Street Journal's Paul Vigna on the recent bitcoin price swings. And you're listening to your money matters from the Wall.

[Anne Marie Fertoldi]

Welcome back, everybody. Credit Suisse's CEO uttered the B word recently in regards to bitcoin. And that's raising concern that it is possibly in one of the biggest financial bubbles of all time. That may have recently scared people, but it's also been a concern for a while.

[Paul Vigna]

Well, it's also probably the fourth or fifth major bubble bitcoin has been in. Again, you have to keep in mind that this is, relatively speaking, a very new asset. It is a very raw market. It is not a very large market market overall compared to other assets. Is it in a bubble? Yeah, it's probably in a bubble. You look at the percentages and they look outrageous. But in absolute terms of the size of this market compared to anything else, the largest bubble of all time, there's no doubt it was either the dot com bubble or the housing bubble. In terms of the number of people involved, the money that was involved, those were most much, much larger than bitcoin. Bitcoin itself has $100 billion market value. All the bitcoin that's out there, if you were able to liquidate it right now, it would equal about $100 billion. That is a fraction of what the housing bubble was at its height, a fraction of what the stock market was at the height of the dot.

[JR Whalen]

Com.

[Paul Vigna]

So, yes, bitcoin has these crazy moves and the volatility and everyone says it's a bubble. And it's still hard to figure out how much of this. No, it's not hard to figure out. I shouldn't Say most of this is still speculative buying. It's people betting bitcoin is something in the future. So, yes, it is a lot of speculative buying and a lot of enthusiastic buying, not based on a lot of fundamentals. So in that sense, you can say it's a bubble, but it's still. It's very small compared to any other financial bubble in history.

[JR Whalen]

And speaking of betting on it and the changes and such, something that's adding to the volatility is the idea of possibly creating bitcoin futures that can be traded. Do you think that's going to happen even though.

[Paul Vigna]

No, that's going to happen. I mean, that is absolutely. And what's interesting about it is there are bitcoin exchanges that exist that will do that for you futures. But now we're talking about the CME Group starting to trade bitcoin futures. We're talking about CBOE doing futures contracts. I mean, you're talking about traditional financial players starting to create derivatives products for bitcoin trading. That is what is really interesting. That is what could bring in some institutional money, some traditional money and into the market. And while bitcoiners think, oh, my God, that just means that there's going to be more money coming in and we're going to go to the moon, is what they love to say to the moon. You know, I think it could actually end up tampering some of the volatility and some of the insane price moves. I mean, because you will, for the first time, you will give people the opportunity to actually bet against bitcoin. It's been very difficult to bet against bitcoin in any kind of large sense. Now it will become easier and you'll have more sophisticated players coming into this market. So that is going to happen. And when that happens, it will be very, very interesting to see what it really does do in terms of bitcoin's prices.

[Anne Marie Fertoldi]

I want to ask you about another potential audience for bitcoin. I'm in what's considered the millennial age group at the very tail end. And we sort of think of that group on the cutting edge of technology. But I can think of members of my own peer group who, if you ask them what exactly bitcoin is, don't quite understand that. How is bitcoin in sort of developing its brand, reaching out to that?

[Paul Vigna]

This is the thing. Bitcoin as a brand doesn't really exist. There's no company pushing bitcoin. There's no marketing team behind bitcoin to get consumer awareness out there. To promote it as a product, as something you should use. You're not going to see bitcoin commercials. It's funny because the issue you're talking about in your generation, I'm seeing in my generation, I'm a Gen Xer. There are people I know who know about bitcoin and there are people I know. I was just at a thing, an event for my son's school and I was talking to a couple of parents who were my generation. They'd never heard of bitcoin. They had no idea what it was. We were talking about what I do for a living. And when I mentioned bitcoin, they had absolutely no idea what it was. The way bitcoin is going to grow is going to be completely viral because there is nobody pushing bitcoin. It is literally just going to be a viral thing. It's going to be more people that pick it up and use it and either like it or don't like it and start recommending it to their friends and talking about it online. That's how it's growing and that is how it's going to continue to grow.

[Anne Marie Fertoldi]

Certainly hearing a lot more about it these days especially.

[Paul Vigna]

Well, yes. I mean, this year, I think three or four years ago, it was still at a point where really most people still had not heard of it. Maybe 75% of the population had not even heard of it. I bet that number's down now. Maybe it's less than half. More people have heard of it, but not as many as you would think. Although the hype this year has been really off the charts because the price has been up so much, so more people. But bitcoin's potential market, I guess, is

[JR Whalen]

still growing, so it's here to stay. Virtual currency is not going away.

[Paul Vigna]

I don't believe so, no. I mean, I think that the technology behind it is really promising and it actually does do some really good things. I mean, the idea that you can move money anywhere around the globe as fast as you can send an email is an unbelievably enticing prospect for the global economy. And whatever the particulars are, figuring out how to build Bitcoin exactly. To make that work on a large scale or some other digital currency, or even a government backed digital currency, somebody is going to do that. This technology has way, way too much potential for it to fade away.

[JR Whalen]

So there's no way going forward to this rest on the check is in the mail because the capability is there to send it instantly.

[Small Business Owner 2]

Right?

[Paul Vigna]

Yeah. What you're going to have to say is the check is caught in your spam filter.

[JR Whalen]

Check your spam filter. By the way, you have written several books on bitcoin and cryptocurrency. What's the latest book?

[Paul Vigna]

Well, the first book was called the Age of Cryptocurrency. That came out in 2015. The next book that my co author Mike Casey and I are working on is going to be called the Truth Machine, and that's coming out in February.

[JR Whalen]

Fantastic. We're speaking with the Wall Street Journal's Paul Vigna about the swings and volatility and the new brave world of bitcoin and cryptocurrency. Paul, thanks for being with us.

[Paul Vigna]

Thank you, J.R. thanks for having me.

[JR Whalen]

And thank you for listening to your Money Matters. I'm JR Whalen with Ann Marie Fertoldi in New York.

[Narrator/Announcer]

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[Small Business Owner 1]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Small Business Owner 2]

Infliction is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner 1]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Small Business Owner 2]

they need while increasing megastore profits. They deserve it, don't they?

[Narrator/Announcer]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.