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Of Nigel Chiwaya
A year ago it seemed that Bitcoin could not be wrong.
On December 17, 2017, the cryptocurrency reached its record high of $ 20,000 on the CoinDesk price index on the industrial site. Two financial stock markets opened the Bitcoin futures markets, a move hailed as a step toward legitimizing the currency in the eyes of Wall Street, and waves of amateur investors tried to buy into the frenzy.
In a particular show of optimism, an analyst predicted that Bitcoin prices will rise to $ 100,000 in 2018.
It did not happen. Instead, Bitcoins and other digital currencies have plummeted this year, punishing their portfolios and sowing doubts about the future of cryptocurrencies.
What happened? In short, the specter of regulation and openness of investors have shaken the market.
The price has collapsed, canceling billions
The price of Bitcoin is notoriously volatile, often swinging thousands of dollars in both directions in a single day. But this did not prepare investors for what happened after the peak. The price of Bitcoin has been withdrawn for the rest of 2017 and closed the year at $ 12,993, according to CoinDesk.
Then 2018 arrived. The currency lost 51% of its value between January 1 and February 6, canceling billions of dollars in market value.
Shone Anstey, president of the Blockchain Intelligence Group, attributed the sharp drop to skittish investors who bought during price craze and then downloaded it while the price started to fall.
"The fear of getting lost has turned into fear of losing," said Anstey. "You had a lot of money quickly, now we have a lot of money coming out."
The launch of futures markets, which allows investors to exchange contracts to buy and sell Bitcoin at a predetermined price later, has also played a role in falling prices, Anstey said.
"It was a perfect opportunity for Wall Street to start shorting it," said Anstey.
Government regulations also weighed on the currency. In January, Bitcoin prices plummeted by 19% when South Korea's finance minister said the country was considering closing virtual currency exchanges. In March, the currency fell below $ 10,000 after the Securities and Exchange Commission announced the requirement that digital asset exchanges must register with the agency.
"The incremental regulation has released energy from the entire cryptocurrency space," said DataTrek Research analyst Nick Colas. "It was an expectation that we have this new technology and we have a new financial ecosystem, and regulators have said not so fast."
Bitcoin has never regained its highs. He spent most of the rest of the year trading between $ 6,000 and $ 9,000. Then towards the end of November, the fund fell, as the price of Bitcoin dropped below $ 6,000.
All in all, the currency lost 84% of its value between December 18, 2017 and Tuesday. Starting December 18 at 4:30 pm, it is valued at only $ 3,525.05 for Coindesk.
While those who bought at the beginning of 2017 have recorded staggering results, the investors who came later have seen their portfolios decrease.
A novice investor, Ryan Lackey, started buying cryptocurrencies in December. Lackey, who works as project coordinator for a document scanning service in California, has invested $ 1,500 in alternative currencies Ripple, Tron and Stellar as of December 17, 2017.
In the beginning, his portfolio rose to $ 5,000. But then Lackey converted his entire portfolio into Bitcoin just as the price began to fall.
"I sold everything in Bitcoin because the Bitcoin king and I have been writing it since then," said Lackey.
Through trading and falling currency prices, Lackey estimates that his portfolio is down 90% from his initial investment.
Lackey said he sees the year as a "learning experience". He says he has become a friend in the Bitcoin community and continues to monitor the market in the hope that prices will rebound.
"They are definitely long-term," said Lackey. "I'm really confident that there will be another big bull run, I know I'll make money in a legitimate bull run."
Lackey considers himself lucky, saying he could afford to lose his investment. But for those who could not afford the losses, the accident was devastating. In South Korea, where more than two million investors seized the digital currencies, young people have struggled to cope with falling prices.
And the Saxo Bank, Kay Van-Petersen, the analyst who predicted Bitcoin $ 100,000? He no longer speaks of Bitcoin.
"Saxo has [a] policy of not commenting on Bitcoin / Crypto since then [January] this year, "Van-Petersen wrote in an e-mail to NBC News.
The general interest has vanished
With the fall in the price of Bitcoin, so too is the general public's interest.
You can see the currency fall from the public interest of Grace News, a New York convenience store that has hosted a Bitcoin ATM for over four years. The ATM, which is hidden in the back corner of the store, was heavily trafficked towards the end of 2017, according to the Yeasim Rashid store clerk.
"People came every five minutes," Rashid said. As soon as I opened the door, people were waiting outside. "
Now? Rashid estimates that maybe five or six clients stop a day.
"It has cooled this year," Rashid said.
The demand for mining equipment drives up the prices of computer components
The peak in Bitcoin prices coincided with the increase in interest for "extractive" cryptocurrencies. For my bitcoins, computers compete for solving complex mathematical equations. Mining requires a powerful hardware and the miners bought them in droves, driving up prices.
Philip Carmichael, owner of PCPartPicker.com, a site for computer aficionados, noted a surge in the price of motherboards and computer graphics cards that began in January 2018. The peak continued until March when Carmichael said that prices usually go down.
"During the peak, it was difficult to buy a video card if you wanted to," Carmichael said.
"There were posts in our hardware forums of people who buy a hundred graphics cards from a store," said PCPartPicker.com technical specialist Ryan Marinelli.
The ICO bubble that exploded
The big drop in the first quarter of Bitcoin has not dampened the clamor around the initial token offerings (ICO), opening sales of new cryptocurrencies usually used to raise funds for start-ups. Investors, hoping to find the next Bitcoin or spend the currency on the start-up product, have spent $ 17 billion on ICO in 2018, according to CoinDesk.
ICOs reached a level of fever at mid-year when Block.one, a tech startup, raised $ 4 billion in ICO for its currency, eos.
For companies that offer coins, ICOs have been a quick way to make money. But it was a risky purchase for investors. A Wall Street Journal analysis of 1,450 coin offers revealed that nearly 20% showed signs of fraud, including plagiarized documents or false executive information.
"There have been very credible reports of huge fraud in the ICO market," said Colas.
The SEC responded to the ICO boom by increasing control over the supply of coins. In November, the agency withdrew $ 250,000 in penalties from two to two cryptocurrency companies for not registering their tokens with the agency. The agency also fined boxer Floyd Mayweather and musician DJ Kahled for hundreds of thousands of dollars for not disclosing money for the ICO promotion.
"We are really witnessing the death of the ICO," said Anstey. "It is not surprising that the SEC pursues them and is pursuing the promoters, creating a lack of trust in the system".
Bitcoin is dead? Or will you recover?
While the experts are positive about the blockchain, the technology behind Bitcoin, they are divided over the future of the currency itself. Some, like Erik Finman, a teenager who became a millionaire investing in bitcoins last year, are bearish. Finman told MarketWatch that Bitcoin is convicted.
"Bitcoin is dead, it's too fragmented, there are tons of infighting, I do not think it will last," said Finman.
Others see a future, but not at the high prices of the sky last year. In a December note to customers, Bloomberg Intelligence analyst Mike McGlone predicted that Bitcoin would return to $ 1,500, but that price volatility and a focus on stability had begun.
"Prices for Bitcoin and others are set to weaken at levels seen at the start of the 2017 frenzy and remain on track to become adequate currencies, we believe," wrote McGlone.
Anstey said Bitcoin will continue to thrive, especially in countries that deal with low value currencies or major inflation.
"Volatility is relative, think about Venezuela, Chile," said Anstey. "When we leave our sandbox, we see that it has a great future ahead of it."
