Crypto’s plunge worse than dot-com crash
As virtual currencies plumbed new depths on Wednesday, the MVIS Crypto-Compare Digital Assets 10 Index extended its collapse from a January high to 80 per cent.
The tumble has now surpassed the Nasdaq Composite Index’s 78 per cent peak-to-trough decline after the dot-com bubble burst in 2000.
Like their predecessors during the Internet-stock boom almost two decades ago, cryptocurrency investors who bet big on a seemingly revolutionary technology are suffering a painful reality check, particularly those in many secondary tokens, so-called alt-coins.
“It just shows what a massive, speculative bubble the whole crypto thing was — as many of us at the time warned,” said Neil Wilson, chief market analyst in London for Markets.com, a foreign-exchange trading platform. “It’s a very likely a winner takes all market — Bitcoin currently most likely.”
Wednesday’s losses were led by Ether, the second-largest virtual currency. It fell 6 per cent to $171.2 at 7:50 am in New York, extending this month’s retreat to 40 per cent. Bitcoin was little changed, while the MVIS CryptoCompare index fell 3.8 per cent. The value of all virtual currencies tracked by CoinMarketCap.com sank to $187 billion, a 10-month low.
The virtual-currency mania of 2017 — fueled by hopes that Bitcoin would become “digital gold” and that blockchain-powered tokens would reshape industries from finance to food — has quickly given way to concerns about excessive hype, security flaws, market manipulation, tighter regulation and slower-than-anticipated adoption by Wall Street.
Crypto bulls dismiss negative comparisons to the dot-com era by pointing to the Nasdaq Composite’s recovery to fresh highs 15 years later, and to the internet’s enormous impact on society. They also note that Bitcoin has rebounded from past crashes of similar magnitude. But even if the optimists prove right and cryptocurrencies eventually transform the world, this year’s selloff has underscored that progress is unlikely to be smooth.