Bitcoin’s yet another plunge on Thursday has proved a survey of Brits predicting the cryptocurrency bubble bursting right.
Bitcoin (BTC) started its fresh slide on Wednesday following an update from Goldman Sachs saying it had put plans to start cryptocurrency trading desk on hold. By Thursday morning the slide turned into plunge, dropping by a $1,000 in 24 hours, to a low of $6,253.
Other cryptocurrencies such as ether, the second largest after bitcoin and based on ethereum (ETH) blockchain platform, fell to its lowest since 2017. It lost 10% in value along with litecoin (LTC), ripple (XRP) and bitcoin cash (BCH). Analysts believe Goldman report hit the sentiment rocking the cryptocurrency market which is worth about $280bn.
Bitcoin had risen to lofty heights last year, nearly touching $20,000 – the price of one bitcoin on 17 December was $19,783.21. Since then it has dropped steadily as governments in South Korea and China began a crackdown and central banks including Bank of France and the US Treasury issuing warnings.
Ever since its invention in 2008, by Satoshi Nakamoto – the name used by the inventor (or inventors) but whose identity has never been confirmed – bitcoin has divided opinions. The currency is built on an open-source technology called blockchain – a digital ledger that provides a secure way of making and recording transactions that are shared across a network of computers. The ledger becomes a long list of transactions – a “chain”, that gets bigger over time with every “block” of record adding on to the previous one.
A revolutionary tech or a scam
Nouriel Roubini, the economist who famously predicted the 2008 financial crisis, calls cryptocurrencies the “mother and father” of all bubbles. In Las Vegas last month, Roubini, who was invited to deliver a keynote speech at BlockShow America 2018, an event to promote blockchain technology and cryptocurrency businesses, launched a scathing attack on all things crypto.
“To call them cryptocurrencies is a joke. They are not money. Their value has fallen by 90% and I can bet on it falling by 90% again in an year,” he said during a debate with Alex Mashinsky, a tech entrepreneur with several patents to his name and chief executive of Celcius Network, an ethereum-based lending platform operated by use of blockchain technologies.
Roubini said crypto promoters are peddling myths, the blockchain is an overhyped technology and ICOs [Initial Coin Offerings] were “total scams”. Mashinsky, however, compared the current volatility to the very early stages of internet, citing example of the now trillion-dollar company, Amazon, and how it too had lost 90% of its value in its early years and was written off by critics.
Currently about $2.1bn is invested in blockchain technology, including $200m by IBM. In the past five years several startups have launched ICOs and an estimated 2,000 cryptocurrencies exist. The total number of bitcoins is limited by the design of the tech that underpins it to 21 million, turning it into an asset, like gold. But critics including Warren Buffet call it worthless.
The UK survey on cryptocurrency
Hate them or love them, cryptocurrencies have snuck up on the global financial landscape. Financial institutions regularly conduct surveys and commission research to gauge sentiment. The latest one in the UK show Brits remain circumspect with a third of them (33% of the polled sample) saying they “believe that the cryptocurrency bubble will burst”.
“Over a quarter of Britons believe cryptocurrencies are less stable investment while a third think it’s a bubble that will burst,” according to a study by IW Capital, a London-based investment company.
Its research reflects scepticism that surrounds cryptocurrencies with only 7% believing cryptocurrency to be more valuable than traditional investment and just 5% saying they have made financial gains from investing in cryptocurrencies.
“It is shocking, but not surprising, to see so much confusion around the topic of cryptocurrency, but to see that investments have been made without proper financial advice and a lack of facts is very concerning,”, said Luke Davis, chief executive of IW Capital.
David Jones, chief marketing strategist at Capital.com, a financial trading platform, said: “Investors in cryptocurrency have not had the best of years in 2018. But this week has been a reminder that the cryptocurrencies still are one of the more volatile and fickle assets out here – and sentiment can change incredibly quickly.”