The last time we spoke about Bitcoin, the price had just fallen below $4 500 (R62 470), and people were calling the plummeting price a “bloodbath”.
Well, things haven’t improved over the past week or so, and at the time of writing the price stands at $3 735 (R51 850).
If you happened to get in on the ground floor, when Bitcoin was worth bugger all, then I guess you’re OK, but for those who bought around this time last year, it’s nothing short of a catastrophe.
It’s so bad, in fact, that the Telegraph are calling it the “Crypto Crisis”, and are wondering if this is the end for Bitcoin.
Damn, because things were going so well:
As the 2017 holiday season loomed into view exactly one year ago, cryptocurrency investors were surfing a wave of optimism, which sent the digital currency cruising to an all-time high. In the first 17 days of December alone, its price more than doubled to $20,000.
Across the board, the valuation of cryptocurrencies was surging, helping tempt new investors that the hype was for real as portfolios swelled…
But a year later, the atmosphere could not be more different.
The writing on this image is tiny, but the graphic on the right-hand side tells you what you really need to know:
At this stage, the panic sirens are well and truly going off:
The digital currency has collapsed in spectacular fashion, with almost $250bn being wiped off Bitcoin’s total market cap since December, while deepening woes have caused prices to sink below $4000 for the first time since September 2017.
On Saturday, Nouriel Roubini, the US economist who famously predicted the 2008 financial crash, offered a damning perspective, describing Bitcoin as “the biggest bubble [and] bust in history”, exceeding even the South Sea bubble and the tulip mania of the 1630s.
So what exactly happened? And is it really curtains for the crypto market, as Roubini and many others believe?
I’m hesitant to mention Roubini, because the last time we did the #cryptobros attacked, but he’s certainly not alone in his doom and gloom predictions.
First of all, there are allegations of market manipulation:
In the US, federal prosecutors are investigating a cryptocurrency named Tether, which claims to be pegged to the US dollar, over accusations that the alternate currency was used to manipulate the price of Bitcoin.
Prosecutors claim that some of Bitcoin’s 2017 rally to its all-time high of $20,000 was down to traders using Tether to buy up Bitcoin at crucial moments.
Earlier this year, researchers published a paper which sought to link the rise in Bitcoin’s price to suspicious market activity using Tether. Claims of artificial manipulation of Bitcoin’s price have been troubling to institutional investors considering a move into Bitcoin.
Over in the UK, there are also fears that the government might impose regulations on cryptocurrencies, with experts publishing a report alleging that these could further hinder cryptocurrency traders:
“If you crowbar everything into the Regulated Activities Order you are making everything into an investment bank,” said Neil Foster, corporate technology partner at Baker Botts.
It’s hard to see how Bitcoin recovers in a year when Bank of England Governor Mark Carney warned that the digital coin was “failing” as a currency, and had become a “global speculative mania” that “exhibited all the classic hallmarks of bubbles”.
Wow, Mark, tell us how you really feel.
Despite the rather gloomy predictions, there are still those who are sticking to their guns:
The Winklevoss twins, two brothers who have made fortunes from their Bitcoin investments, remain bullish on the future prospects of the market, while a more mature approach to digital coins like Tether being pegged to fiat currencies is taking shape in what’s known as Stablecoins.
Not surprised that the Winklevoss twins (or Winklevii, when speaking of them both) are hanging in there, given that they own a staggering amount of Bitcoin.
Also standing firm is Iqbal Gandham, UK managing director of crypto trading platform eToro:
“The people who bought in September 2017 when we saw the huge rise, I’m sure there is a certain amount of concern among them. But the industry itself is still moving forward towards its goal saying ‘we still believe in this’” he says.
“The ones who really understand the power of Bitcoin and the power of blockchain realise this is not something that’s going to disappear. I don’t think traditional finance is going to miss the opportunity again.”
Almost like he has a horse in this fight, that Iqbal.
Whether or not one understands what lies ahead for Bitcoin, the fact remains that if you bought last year, when the price soared near $20 000, you’re not going to be feeling all that swell right now.
In fact, even the Bitcoin miners are running for the hills. This from Bloomberg:
Bitcoin miners hit hard by the cryptocurrency’s crash may be throwing in the towel…
“This suggests that prices have declined to a point where mining is becoming uneconomical for some,” JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a Nov. 23 report, in reference to the falling hash rate.
Bitcoin miners, who perform the computations necessary to confirm transactions in the cryptocurrency, are rewarded for their efforts with Bitcoins. If prices suffer a sustained drop below miners’ breakeven costs (determined by their electricity bills, mining-rig efficiency, and other factors), they may be forced to shut down to avoid operating at a loss.
The break-even cost to mine a single Bitcoin using Bitmain’s Antminer S9 rig was estimated at $7,000 in a Nov. 16 report by Fundstrat Global Advisors, though the level is probably lower for some miners with access to cheap electricity and equipment.
I reckon the casual investors have already jumped ship, and it’s just the hardcore #BoetcoinBros that remain.
Maybe they know more than us, or maybe they’ve just been too stubborn to admit defeat.