Welcome to the world of unregulated, decentralized finance. Perhaps you are young enough and did not find bubbles in the real estate market and in the  technology sector . But thanks to the invention of crypto currency you have a completely new way to part with your savings.

Due to the collapse of quotations, crypto-currencies like  bitcoin  and ether, investors lost about $ 400 billion of paper profit. The capitalization of bitcoin was reduced by about 200 billion, the airspace – by 67 billion dollars.

If you bought crypto currency for a long time, the current decline did not hit your pocket too much – the price of bitcoin just returned to the level of November, and the air today is much more expensive than a couple of months ago.

But these lost 400 billion have hurt many people. Strongly affected by those who bought crypto-currencies in December or January. Some of the losses fell on early investors or crypto entrepreneurs, who earned their fortunes on a new asset class. Others hit the middle class, who hoped to get rich on crypto-currencies. But there is a chance that the fall will be permanent if governments tighten regulation or people are disappointed in the detachment.

But the most important thing is different: at some point in time, the influx of investors interested in a new asset class may simply end. Bitcoin is digital gold; it is not very well established as a means of payment. However, people are sure that the crypto currency will allow them to protect themselves from the collapse of modern governments and banks. The first investors who believed in the story of the collapse of the financial system, earned good money, selling their crypto currency to those who came to the market much later because of the same fears.

This opens up opportunities for earnings for those who do not believe in the collapse of classical money, but believes that there are still those in the world who believe otherwise. You can even bring the idea to a new level and make money for those who do not believe in the collapse, but believes that there are still a lot of potential buyers in the world (I definitely do not believe in the collapse of the existing financial system, but I keep a small number of bitcoins and ethers in case, if there are willing to buy them at high prices).

Probably, this is how bubbles of assets develop. Many economists have tried to model the process of speculation with the help of the so-called “bigger fool.” Dilip Abreu and Markus Brunnermeier presented the most famous theory in 2003. But a simpler and more elegant model was proposed in 1999 by a little-known Israeli economist, Joseph Zeyra.

Zeira developed his theory during the technological bubble, so he had to act within the framework of the then dominant theory of effective markets, calling bubbles not his own name, but “information misses.”Its extremely simple model requires only that investors have different opinions regarding the number of potential buyers on the market. Proceeding from this highly plausible assumption, it shows that bubbles and crises are a natural and inevitable phenomenon caused by financial liberalization, which allows more investors to start buying assets. The emergence of digital currencies and crypto-exchange is equivalent to such liberalization.

Thus, bubbles can be a unique mechanism – a natural and fully legitimate analogue of the financial pyramid, which happens every time a new asset class or type of investment arises. Bubbles create and destroy unrealized wealth, but they also redistribute financial flows – from those who bought the latter to those who bought and sold first. Since true enthusiasts tend to hold the asset long after the end of the bubble, the most profitable are the discerning speculators (that is, those who have more accurate ideas about the number of potential investors in the market).

If the current price collapse is the end of the bubble, it will be the third such event in two decades. Along with the emergence of new enthusiasts, potential investors and the development of the technology of the saga of the bubble and collapse will be repeated again and again. And each time, speculators will cash in on ordinary people. So far no one knows how to break out of this vicious circle.