How to Predict Bitcoin Bubbles Before They Burst
Bitcoin Bubble Crashes: How to Predict Them and Protect Your Investments
The last time out, I mentioned that my wife had invested a significant chunk of her money into cryptocurrency. But let's be honest—crypto, for all its hype and promise, is fraught with problems. The market is wild, unpredictable, and often ruthless. One minute you're up 50%, the next you're staring at a 40% drop. The collapse of CBEX, a digital cryptocurrency investment platform days ago is a testimony to this.
As her partner, I feel a deep sense of responsibility to help her protect that investment. It's not just money—it's trust, hope, and the future we're trying to build. So I went back to the drawing board. I needed to find out: Is there a way to predict when a crypto bubble is about to burst? If we could see the signs early, she could exit the market before things go south.
That hunt led me to a groundbreaking 2020 study by Min Shu and Wei Zhu from Stony Brook University, titled "Real-time Prediction of Bitcoin Bubble Crashes." This wasn't just another opinion piece. It was solid academic research. Shu and Zhu used advanced mathematical models—complex, yes, but incredibly insightful—to detect the formation and potential collapse of Bitcoin bubbles in real time.
In essence, their work offers a method that could help investors see the storm coming, rather than just hoping they'll survive it. Potentially, this could save investors millions—and give regular folks like my wife a fighting chance in the crypto world.
What Is a Bitcoin Bubble?
A bitcoin is a cryptocurrency. A crypto bubble or bitcoin bubble occurs when Bitcoin's price skyrockets far beyond its real value—fuelled by hype, speculation, and FOMO (Fear of Missing Out). Eventually, the bubble bursts, causing massive price drops.
For instance, in January 2018, Bitcoin's price crashed 66% in just 30 days—wiping out billions in market value.
The 2 Key Signs of a Bubble (Before It Pops!)
According to Shu & Zhu's research, Bitcoin bubbles have two distinct characteristics: Super-Exponential Growth and Log-Periodic Oscillations. Those are big terminologies.
In a Super-Exponential Growth bubble, prices of Bitcoin rise faster than normal, like a rocket before it explodes. While in a Log-Periodic Oscillations involve small, repeating price swings that get more extreme as the crash nears.
Bitcoin's Biggest Crashes (2011-2019)
| Year | Peak Price | Crash Size | Days to Crash |
|---|---|---|---|
| 2013 | $229 | -70.3% | 7 |
| 2017 | $19,187 | -34.1% | 14 |
| 2018 | $17,527 | -60.3% | 30 |
(Source: Shu & Zhu, Physica A, 2020)
From the table of Bitcoin's biggest crashes from 2011 to 2019, bubbles always burst—the only question is when.
How Scientists Predict Bitcoin Crashes (Before They Happen!)
Shu & Zhu's study introduces a powerful mathematical tool called the Log-Periodic Power Law Singularity (LPPLS) model. Sounds complex, right? But in simple terms, it's a way to spot when prices in the crypto market are acting too good to be true—and are likely to crash.
Here's how it works:
- It analyzes price trends — using ultra-detailed data like hourly or even minute-by-minute price movements.
- It looks for "super-exponential" growth — that is, unnatural and unsustainable price surges that suggest a bubble is forming.
- It detects a "critical time" (tₐ) — which represents the most likely point in time when the bubble will pop and prices will crash.
For example, in December 2017, Bitcoin's price was skyrocketing. But the LPPLS model saw warning signs. It predicted a crash—and just days later, Bitcoin's value plunged by 34%. The model was on point.
3 Warning Signs a Bitcoin Bubble Is About to Burst
Based on Shu & Zhu's research, here's what you should watch out for:
- Rapid, Unsustainable Price Surges: If Bitcoin jumps 20% or more within a week, that could signal a bubble forming. Be cautious.
- Increased Volatility (Wild Price Swings): Sudden up-and-down movements often come right before a crash. Big spikes equal big risks.
- Media Hype & "To the Moon!" Mentality: When everyone starts saying "Bitcoin can't lose," history shows it usually does.
📢 Poll: When Do You Think the Next Bitcoin Crash Will Happen?
How to Protect Your Crypto Investments
Shu & Zhu's study found that short-term charts (30-min to 1-hour) are more accurate for predicting crashes than daily charts. The action tip is to regularly check hourly Bitcoin charts. If you see erratic price behaviour, it might be time to trim your position.
You should set automatic sell triggers (e.g., 10–15% drop) to avoid getting trapped in a crash. This helps you stay rational, not emotional, during high-stress dips. And more importantly, diversify — don't go all-in on Crypto. Mix crypto with stocks, real estate, gold, or other stable assets. The more you spread out your risk, the more cushions you have if crypto tanks.
👉 Read: The Truth About Crypto Investments: Gains and Losses
👉 Read: The Hidden Cost of Convenience: Why Your Contactless Card Could Be Making You Spend More
👉 Read: Why Stock Prices Overreact: Insights from Behavioral Finance
Final Thoughts: Don't Be a Crash Victim
Bitcoin bubbles aren't going anywhere—but now, you know how to spot them early.
With LPPLS-based insights, you can plan your exit before disaster strikes. Knowledge is your best defence against hype-driven markets.
Your Turn:
- Have you survived a Bitcoin crash?
- What did you learn from it?
👇 Drop your experience in the comments and help others stay safe.
🚀 Stay smart, invest wisely, and never let a bubble catch you off guard.
Appendix: Key Data from the Study
Bitcoin's Worst Crashes (2011–2019)
| Year | Peak Price | Crash Low | % Drop |
|---|---|---|---|
| 2011 | $31 | $2 | -94% |
| 2013 | $266 | $50 | -81% |
| 2017 | $19,783 | $3,200 | -84% |
LPPLS Model Prediction Accuracy
(Log-Periodic Power Law Singularity Model)
| Prediction Window | Accuracy Rate |
|---|---|
| 1-Hour Data | 89% |
| Daily Data | 72% |
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