Bloomberg: Crypto Crash of 2018 Now Worse than the DotCom Contraction

The cryptocurrency market has lost 80% of its value since December 2018, with some altcoins, led by Ethereum, down over 90%.

The crash that followed the burst of the dot-com bubble in 2000,  on the other hand, involved a correction of only 78% percent, says Bloomberg, citing year 2000 “peak-to-trough” figures from the Nasdaq Composite Index.

Last fall, critics clamoured to be heard above the din of exuberance that saw “Bitcoin” become the number one search term on Google and the hottest topic at dinner tables during American Thanksgiving, but their warnings were largely ignored.

Many novices ran out and invested in crypto at all-time-high prices.

Many stories then circulated about inexperienced investors who had had a bit of luck luck in 2017 bull markets going “all in” on crypto. People re-mortgaged their houses and placed multi-X leveraged bets on minimally-regulated crypto exchanges when Bitcoin was traded upward in a frenzy towards $20 000 US.

It now trades for around $6300.

A Twitter user last week reported that she knews a student that is currently suicidal after investing student loan funds in Ethereum at it all time high price of $1432.

According to Bloomberg:

“Wednesday’s losses were led by Ether, the second-largest virtual currency. It fell 6 percent to $171.15 at 7:50 a.m. in New York, extending this month’s retreat to 40 percent. Bitcoin was little changed, while the MVIS CryptoCompare index fell 3.8 percent. The value of all virtual currencies tracked by CoinMarketCap.com sank to $187 billion, a 10-month low.”

Bitcoin is once again dominant as crypto true-believers use it as a safe harbour in turbulent times.

“It’s a very likely a winner takes all market — Bitcoin currently most likely,” Chief Market Analyst in London for forex platform Markets.com, Neil Wilson, told Bloomberg.

Following the advent of Bitcoin, a peer-to-peer Internet money system governed collectively by enthusiasts, first a few then thousands of copycat and slightly-modified systems and coins(ICOs- initial coin offerings) attempted to launch and improve upon or duplicate Bitcoin’s functions.

All of those systems, including Bitcoin, remain experimental, and governments are scrambling to understand, incorporate and regulate them.

Many copycats were arguably built to simply allow creators to sidestep securities regulations and “print money” by trading digital tokens of questionable utility for investors’ real-world fiat.

Critics say that money raised by ICO has typically gone more into marketing the tokens than developing the tech.

Many of these technically weak projects are now failing in a market plagued by, “excessive hype, security flaws, market manipulation, tighter regulation and slower-than-anticipated adoption by Wall Street,” says Bloomberg.

But though the losses feel close to home for those involved, the dot-com crash was still of much greater magnitude overall. Crypto markets have now “erased “$640 billion dollars of market cap since the December peak, but the dot-com crash saw the disappearance of trillions, says Bloomberg.

Hardcore and seasoned crypto traders are also a hardy bunch used to vertigo-inducing volatility. Many even prize it.

According to Forbes, “In the spring of 2013, a ghastly collapse saw the price of bitcoin fall from $233 to $67—overnight! That’s a 71% drop. It would take seven months to recover.”

Bitcoin then achieved a 10X run up to $1150 by the end of 2013 before the price crashed 50% in the first two weeks of December. Bitcoin wouldn’t see a price above $1000 for four more years.

Legendary malfeasance and incompetence at the Mt Gox exchange in 2014 triggered a 49% drop in the price of Bitcoin and a subsequent “doldrums” that persisted until late 2016.

 

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