BTC is down around 60 per cent since topping $67,000 (£55,375) six months ago, to trade at around $28,000 at the time of writing. The total crypto market, which includes other digital currencies such as Ethereum and Dogecoin, has lost more than $1 trillion (£830bn) in value. This is not the end of Bitcoin’s problems.
Bitcoin is still valued at around $1.3 trillion in total, but could continue to shrink as global volatility continues. So are we finally witnessing the death of Bitcoin?
Many people will be happy to see Bitcoin gone forever, given that it still offers little 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, turning a handful of early-stage investors into billionaires and impoverishing millions of newcomers.
BTC is now falling due to “the chaotic mix of interest rate hikes, fears of an impending recession, and military conflict in Europe,” says Sam Kopelman, UK manager of global cryptocurrency exchange Luno.
This could mark a long-term bear market for cryptocurrencies, he said, urging investors to resist the urge to buy the current dip in hopes of profiting from a quick recovery. “Bitcoin price decline may not be over yet. Support can be found at $20,000.”
However, Bitcoin has dropped sharply before only to cover it just as quickly, and it’s still too early to write it off.
Cryptos are falling for the same reason as other high-risk, high-reward assets. Because investors are getting nervous and are not willing to take much risk.
The Nasdaq index of New York technology stocks has plunged 30 percent this year. Tech growth stars like Netflix, Facebook and Amazon now face a much tougher business environment as recession fears mount.
Customers are being squeezed by the cost-of-living crisis, while borrowing costs rise as central bankers raise interest rates to curb inflation.
READ MORE: Crypto CRASH: Bitcoin Heads for Record Losing Streak After Crash
The crash has shattered a myth about Bitcoin, which 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.
Two other historic safe havens, gold and silver, have also fallen, said Fawad Razaqzada, a market analyst at City Index. “Like Bitcoin, they are struggling because they don’t give investors interest and dividends.”
The crash is a tough pill to swallow for many young investors, who often take big risks to gain exposure, said Myron Jobson, senior personal finance analyst at Interactive Investor.
Their research shows that cryptocurrencies are the investment of choice for 45 percent of 18-29 year olds. “An alarming number have financed this through credit cards and other forms of credit, leaving them with a double whammy of investment loss and debt, made worse by rising interest rates.”
They can only hope Bitcoin recovers, Jobson says. “Crypto evangelists will point out that the market has fallen before spiking to record highs, but as interest rates rise and the economy slows, we are in a different world.”
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One global stock market has shrugged off the global slowdown to hold steady this year, the UK’s own FTSE 100.
Blue-chip stocks in the index, such as BP, Lloyds, Persimmon, Unilever and Vodafone, pay some of the most generous dividend income in the world, protecting investors against inflation.
The FTSE 100 is down less than 5 per cent so far this year, which is good news for millions of Britons with money tied up in pensions and Isa stocks and shares. Unlike Bitcoin speculators, they have protected themselves from the worst of this year’s crash.
It’s quite a change to see boring old FTSE crush futuristic crypto.