BTC is down nearly 60 per cent since it topped $67,000 (£55,375) six months ago, to trade at around $28,000 at the time of writing. The total cryptocurrency market, which includes other digital currencies such as Ethereum and Dogecoin, has lost more than $1 trillion (£830 billion) in value. This is not the end of bitcoin’s problems.
Bitcoin is still worth about $1.3 trillion in total, but it could continue to shrink as global volatility continues. Are we finally witnessing the death of Bitcoin?
Many people will be happy to see Bitcoin vanish for good, since it still offers little in practical value, while mining virtual currencies on computers generates more greenhouse gas emissions than Bangladesh.
It has also fueled a culture of get-rich-quick online trading, which has turned a handful of early adopters into billionaires, and made millions of latecomers poorer.
BTC is now falling due to the “chaotic mix of high interest rates, fears of an impending recession and military conflict in Europe,” says Sam Kopelman, director of global crypto exchange Luno in the UK.
He said this could represent a long-term bear market for cryptocurrencies, and urged investors to resist the temptation to buy the current dip in the hope of profiting from a quick recovery. “Bitcoin’s drop may not be over yet. Support could be found at $20,000.”
However, bitcoin has fallen so sharply before it can be capped just as quickly, and it’s too early to write off just yet.
Cryptocurrencies are falling for the same reason that other high-risk and rewarding assets are falling. Because investors are becoming nervous and unwilling to take on a lot of risks.
New York’s Nasdaq tech stocks are down 30 percent this year. Tech growth stars like Netflix, Facebook and Amazon now face a tougher business environment as recession fears grow.
Customers are under pressure from the cost of living crunch, while borrowing costs are rising as central bankers raise interest rates to curb inflation.
READ MORE: Crypto CrASH: Bitcoin Heads For Record Streak After Crash
The crash has destroyed one myth about Bitcoin, which is that it is now a safe haven in times of trouble. Or “digital gold” as some called it. Instead, it has fallen faster than almost any other asset class.
Fouad Razakzadeh, market analyst at City Index, said two other historical safe havens, gold and silver, were also down. “Like Bitcoin, they struggle because they don’t give investors any interest or profits.”
The crash is a hard-to-swallow pill for many young investors, who often face significant risks of exposure, said Myron Jobson, senior personal finance analyst at Interactive Investor.
Her research shows that cryptocurrency is the preferred investment for 45 percent of people between the ages of 18 and 29. “An alarming number has funded this with credit cards and other forms of credit, leaving them with the double face of investment and debt losses, exacerbated by higher interest rates.”
Jobson says they are only hoping that Bitcoin will recover. “Crypto evangelists will point out that the market has fallen to record lows before, but with interest rates rising and the economy slowing, we are in a different world.”
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One global stock market shrugged off the global slowdown to settle this year, the UK’s FTSE 100.
Index blue chips, such as BP, Lloyds, Persimmon, Unilever and Vodafone, pay some of the world’s most generous dividends, shielding investors from inflation.
The FTSE 100 is down less than 5 per cent year-to-date, which is good news for the millions of Britons who have invested their money in pensions, stocks and Isa shares. Unlike Bitcoin speculators, they have been shielded from the worst of this year.
It’s a huge turnaround to see the old FTSE smash into the future cryptocurrency.