Quote from Ndubuisi Ekekwe on May 31, 2018, 6:06 PM

A new paper from the United States Federal Reserve Bank of San Francisco has an explanation why the price of Bitcoin crashed

We suggest that the rapid rise of the price of bitcoin and its decline following issuance of futures on the CME is consistent with pricing dynamics suggested elsewhere in financial theory and with previously observed trading behavior. Namely, optimists bid up the price before financial instruments are available to short the market (Fostel and Geanakoplos 2012). Once derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value. While we understand some of the factors that play a role in determining the long-run price of bitcoin, our understanding of the transactional benefits of bitcoin is too imprecise to quantify this long-run price. But as speculative dynamics disappear from the bitcoin market, the transactional benefits are likely to be the factor that will drive valuation.

So, as with home mortgages and other instruments, early on investors have no reliable way to bet against the commodity, so prices rise dramatically. The arrival of futures trading allow pessimists finally to place their bets, driving down the price, added Fortune in a newsletter.