The bitcoin price has this week crashed under $16,000, with some warning the entire crypto market could be “headed for oblivion.”
Now, the legendary short-seller Jim Chanos has branded the latest bitcoin and crypto crash “the dot-com era on steroids” and warning the FTX implosion is only the beginning.
It’s in a brutal bear market that you need up-to-date information the most! Sign up now for the free CryptoCodex—A daily newsletter for traders, investors and the crypto-curious that will keep you ahead of the market
“Asset prices are the staunchest defense attorney and harshest prosecutor for financial fraud,” Chanos told the Odd Lots podcast in the aftermath of the FTX deal with Binance falling apart earlier this month. “It’s only when people begin losing money that you begin to get a public outcry,” he said, pointing to the combined crypto market capitalization dropping under $800 billion this month from a peak of around $3 trillion 12 months ago.
The dot-com bubble through the late 90s and into the early 2000s saw a huge increase in technology and internet company stock prices that saw the tech-heavy Nasdaq index lose almost 80% of its value.
“People were losing money in the dot-com era for about a year but it wasn’t until the Enron and WorldCom scandals hit that the Federal government really geared up its efforts to look at corportate wrong doing,” Chanos said. “This will be the same thing.”
Last week, world leaders called for “critical” international rules to govern the fast-growing bitcoin and crypto space and said potential risks to “financial stability” needed to be mitigated while U.S. Treasury secretary Janet Yellen said the fall of FTX “demonstrate[s] the need for more effective oversight of cryptocurrency markets.”
Sign up now for CryptoCodex—A free, daily newsletter for the crypto-curious
Following FTX’s collapse, serious questions have been raised about the financial health of other major crypto companies.
“People have lost a lot of money in crypto and there’s going to be a political outcry now to regualtor this system and bring people to justice,” Chanos said.
However, Chanos doesn’t expect the bitcoin and crypto market meltdown to spread to other aspects of the financial system. “I don’t think this is contagion through the credit markets,” he said.