It is difficult at times to believe only a year ago Bitcoin was trading at the $10,000 mark. A the time, some investors believed the cryptocurrency would one day be traded at ten times this amount. Unfortunately, 2018 may be remembered as the year of death for the cryptocurrency.
Bitcoin traded at $3,768 on Monday. This number represents a 75 percent loss of value for Bitcoin over the past year. Other cryptocurrencies did not fair any better than Bitcoin. As a whole, the cryptocurrency market decreased in value by $670 billion in 2018.
The Hype Is Over
The fall of cryptocurrency can be blamed on a variety of factors. The principle factor seems to be the speculative nature of the investment. The nature of cryptocurrency investments is similar to gold in that the value is dependent on investor sentiment for the product.
According to Forbes, much of the hype surrounding digital currencies like Bitcoin has faded dramatically. Industry experts believe it now unlikely that after a decade of use cryptocurrency will prove capable of supplanting cash and other payment methods.
The criticisms of Bitcoin has come from some powerful places. Jamie Damon, CEO of JPMorgan Chase, expresses the belief that cryptocurrency is a scam. Warren Buffet has also been on record saying that he does not look at cryptocurrencies as a legitimate investment opportunity.
Increased Regulations
The digital currency market has also been negatively affected by fears of pending government crackdowns. These fears were increased by recent fines against two companies dealing with digital currencies by the Securities and Exchange Committee. The fines were due to a failure by the companies to properly register their ICOs as securities.
Fred Wilson is a noted Bitcoin investor. Wilson compares the current situation with cryptocurrency to the dot-com bubble of old. The bursting of the dot-com bubble caused many to doubt the sustainability of the internet.
Tech stocks like Amazon took a beating when the dot-com bubble burst. The tech companies bounced back and handsome earnings were realized by investors that stayed the course. Wilson is of the belief that a similar occurrence will take place with cryptocurrency investments.
Wilson also said, however, the situation is likely to get worse in the near future before the rebound occurs. He points to the heavy regulations imposed against tech companies following the original bubble enjoyed by the industry. Wilson feels this is exactly the current state of cryptocurrency.
