In December, bitcoin has reached nearly $20,000. Then, in mid-January it has fallen to under $10,000 a coin. Other digital currencies, such as ethereum and ripple, have followed. According to the founder of Cryptocompare, Charles Hayter, “There is a lot of panic in the market. People are selling to get the hell out of there.” Some of these worries are coming from a potential ban of cryptocurrency trading by South Korea. China is also cracking down on it. Japan is considering a similar move.
According to Fortune, government officials will discuss the rise of bitcoin during the upcoming G20 meeting.
The recent volatility isn’t new. In 2011, bitcoin has fallen over 90 percent in value. This volatility hardly makes it behave as a good national currency alternative. Bitcoin and other digital currencies don’t behave like American or Canadian dollars, British pounds, Swiss franks, or Japanese yen.
This scares off investors from holding them, and also makes retailers wonder whether they should accept cryptocurrencies as payments. Even small declines can lead to losses as retailers often operate on thin margins.
There is too much speculation going on. Even a parody digital token, DogeCoin, has at one time reached a $2 billion market valuation. Surely, there are many worthless digital tokens. The total number of these new currencies is estimated to be over 1300, much more than the number of national currencies.
During the recent sell-off, the ten biggest digital currencies lost over $100 billion in 24 hours. This is when bitcoin fell by over 16 percent, ethereum by over 17 percent, and ripple by 27 percent. Other popular ones followed with massive losses as well.
There are many critics of bitcoin and the likes. Warren Buffet feels it is a bubble. Even the creator of litecoin, Charlie Lee, has sold and donated all his holdings. During a recent sell-off, litecoin has dropped by 16 percent.