The bubble is finally bursting, leaving a trail of gullible fools to nurse their losses. We are simply witnessing a correction in the greatest bull market of all time. Governments are getting scared and clamping down as they witness their power ebbing away, the North Koreans are manipulating the market as an overture to war, and the Knights Templar are controlling all the cryptocurrencies as a way restoring their ancient order to global power. OK, I admit I made that last one up after reading a bit too much Dan Brown, but all the others are explanations seriously put forward for the wild volatility in the price of bitcoin so far this year. Indeed, there are almost as many opinions out there as there are actual units of the digital currency.
Amid all that speculation, however, one point is easily overlooked. The crazy movements in the price mean that bitcoin will never be the one thing it is actually meant to be – a digital currency. As the Starbucks chairman Howard Schultz pointed out last week, there is space for a digital currency. But it is not going to be bitcoin – and that means we are still waiting for the version that will get it right.
During 2017, bitcoin was on an epic bull run, rising from less than $US1,000 a unit in February to a high of $US19,501 in late December. But, in the past couple of weeks, it has plunged almost as dramatically. On Monday, it dropped below $US7,700, losing almost two thirds of its value in the space of a couple of weeks after Lloyds joined other banks in saying it wouldn’t allow customers to buy the currency on their credit cards.
It hasn’t been any better for the other cryptocurrencies. Ethereum is down from $US1,050 to less than $US850 and Litecoin is down from close on $300 a unit to less than $US150. Anyone who jumped on the crypto bandwagon after Christmas will be feeling badly bruised by now. It remains to be seen whether those currencies recover in due course, or whether they sink back into obscurity. One thing should be clear, however. Bitcoin might or might not be a part of the financial system one day. But it is not ever going to be a genuine currency.
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