All good things must come to an end—and bad things, too. Bitcoin has had a hell of a ride over the last year, but that all seems to be over as almost 60 per cent of its value has vanished in the last month. Enthusiasm in the cryptocurrency market is low as Bitcoin dropped below $8,000 (£5,664) for the first time since November.
According to the popular cryptocurrency app Coinbase, the price of Bitcoin slumped to $7,540 (£5,338) on Friday morning before picking up to around $9,000 (£6,372) a little before noon. The run of thousand per cent increases was never sustainable, and even the most dedicated believers in the cryptocurrency revolution didn’t think the high of almost $20,000 (£14,160) would hold in the short term. But the common belief among the community has been that $10,000 (£7,080) was as low as it would go. Irrational exuberance inevitably invites corrections, but it’s beginning to look like we’re witnessing a massacre.
In a matter of 24 hours, about $30 billion (£21 billion) was wiped off of Bitcoin’s market cap. A look at the charts on CoinMarketCap shows that all but five of the top 100 cryptocurrencies are down, most by double digits. All told, Bitcoin has lost $177 billion (£125 billion) from its high in December.
It’s not difficult to pin down why this is all happening. Even if you truly believe that blockchain technology is the future and decentralised currency will eventually find its footing, it’s impossible to ignore the fact that we’ve seen nothing but bad news for the whole crypto-sphere.
What’s perhaps the most troubling for long-time bitcoiners and newcomers alike is the almost daily developments in government regulations to address cryptocurrency. As financial analyst Nouriel Roubini, of Roubini Macro Associates, told Bloomberg, “Pretty much every G20 policymaker is talking about a crackdown.” This week saw officials in India indicate that they will be introducing regulations to completely eliminate payments with cryptocurrency in their country, and they made it official that India does not recognise Bitcoin as a legal tender.
While hugely successful companies like Facebook are trying to purge their services of cryptocurrency scams, floundering companies like Kodak have jumped at the opportunity to attract investors by slapping blockchain buzzwords onto their business plans. Kodak was supposed to launch its own initial coin offering (ICO) on Wednesday, but as more information was revealed about the company’s plans by the New York Times, Kodak said it needed more time to vet potential investors. Most of the gains that Kodak’s stock made after its blockchain announcement are now gone.
The most infamous company capitalising on the frenzy, formerly named Long Island Iced Tea Corp, appears to have had a change of heart and on Friday it announced that it won’t be buying 1,000 cryptocurrency mining rigs after all. At the moment, the company’s name is still Long Island Blockchain.
Nobel Prize-winning economist Robert Shiller has insisted that Bitcoin will eventually “totally collapse,” even if it takes 100 years. At the moment, it’s on track to reach that goal much more quickly. Whether the “Bitcoin is bogus, but blockchain is real,” crowd will be proven right remains to be seen. Blockchain is, without a doubt, a unique technology, and lots of people are working interesting applications for it. The problem remains that the thousands of ICOs that have cropped up have their values inescapably entwined with Bitcoin. Maybe they’ll be able to disentangle that co-dependent relationship, but the expensive growing pains are certain to take a long time. [Bloomberg]