Bitcoin and ether are both declining by more than two thirds compared to their peaks

Enlarge / Ether, the cryptocurrency of the Ethereum network.

The ether, the currency of the Ethereum network, has plunged 9 percent in the last 24 hours. The virtual currency is now worth around $ 290 – the first time was less than $ 300 this year

The price drop is part of a larger criptale sell-off that has seen most of the cryptocurrencies lose value in the last 24 hours. And it is part of a long-term trend that has seen the gradual deflation of the last year's cryptocurrency bubble.

Bitcoin, the most precious currency in the world, has lost only 1% of its value in the last 24 hours. This year has consistently slipped down, rising from a high of nearly $ 20,000 in mid-December to $ 6,250 today.

Ether saw an even more dramatic decline, plummeting from $ 750 at the start of the year and a maximum of $ 1,400 in mid-January-to $ 290 today.

Litecoin is down about 4 percent in the last 24 hours at $ 56. It has fallen more than 80 percent from its January high to above $ 300.

What is causing the cryptocurrency bust?

The answer to this is as mysterious as the one that pushed virtual currencies to these levels last year.

In 2017, the world of cryptocurrency seemed to be in the middle of a classic speculative bubble. More and more people have heard about the huge profits enjoyed by former cryptocurrency investors and have decided to buy some in the hope of making similar gains. This pushed the star ratings of the major cryptocurrencies like bitcoin, litecoin, ether and Bitcoin Cash.

The speculative boom in 2017 was driven in part by the spectacular success of the "first coin offerings". The little known cryptocurrencies were offered to the public for the first time in the summer and autumn 2017, and many of them obtained millions, in some cases tens or hundreds of millions of dollars.

These sales often used bitcoins or ethers as their exchange media, pushing up the prices of bitcoin and ether. The growing value of bitcoins and ethers has attracted even more people who wanted to grapple with the purchase of exotic cryptocurrencies in hopes of identifying the next huge cryptocurrency.

But this process was exhausted at the beginning of 2018. And since then, the process seems to have worked the other way around. People have continued to hold the first coin offerings, but few have published the kind of spectacular gains earned by ICO participants in the early and mid-2017s.

Investors' interest has been marked and the price of the main cryptocurrencies has stopped growing. With prices that no longer touch the new records, media interest has declined, eliminating an important source of new users. The price has started to fall, triggering greater pessimism.

It is important to note that cryptocurrencies have already had falling precedents. Bitcoin has gone through at least two major bear markets in the past: one at the end of 2011 and the other in 2014. In both cases, people who bought at the peak suffered heavy losses. But in the end, the bitcoin price started to turn and growth picked up. Ultimately, in 2017, the value of bitcoin rose to values ​​much higher than those achieved in previous booms. And other cryptocurrencies have increased along with them.

So it is possible that this process will be repeated again: that the market will eventually change and that prices will start to rise again. The big question, however, is whether there really is room for another big boom. The bitcoin boom of 2011 and 2013 was largely under the radar of the mainstream discussion. The bitcoin boom of 2017, on the contrary, has been widely discussed.

At this point, almost everyone has heard of cryptocurrency, and most of the people who were interested in investing have already done so. Which means there may not be a large group of potential new investors to drive another boom.

This means that the long-term value of cryptocurrency ultimately depends on research into practical applications for technology. If bitcoins, ether or other cryptocurrencies become the basis for new mainstream payment networks or other useful applications, this will encourage the demand for cryptocurrencies and increase their price. If such applications do not emerge, on the other hand, prices may continue to decline for quite a while.

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