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Are Bitcoin’s days of riches over?

Cryptocurrencies have taken investors on a roller-coaster ride. When Bitcoin first gained public hype in 2013, it was as a new innovative digital currency. But Bitcoin’s wild price swings from its peak of $20,000 (Dh73,460) in December 2017 to $4,518 drop this year, has made its potential to be used as an everyday currency less likely. Ten years since Bitcoin was first mined in 2009, we take a look at the state of digital currencies.

What is Bitcoin?

Bitcoin is the world’s first and most popular cryptocurrency. It is the largest among a basket of more than 2000 coins with a market capitalisation of $78.5 billion, according to CoinMarketCap. Traded on marketplaces known as Bitcoin exchanges, investors can buy or sell using different currencies. Bitcoin was created by the still-unidentified person using the alias Satoshi Nakamoto. In an academic paper in October 2008, Mr Nakamoto first outlined how the digital currency would work and described blockchain, the technology central to Bitcoin. The frenzied hype about the currency is centred around people trading in it to get rich quick and regulation headaches for financial regulators.

Why has happened to Bitcoin?

Cryptocurrency markets were thrown into turmoil this week as major coins suffered a rout, shaking confidence in the asset class. Bitcoin fell 25 per cent in the past week. The plunge has fuelled a sell-off among competing coins Ether, XRP and Litecoin. Cryptoinvestors are left reeling at the sudden decline in November after months of relative stability. An outspoken Bitcoin critic and a professor at New York University, Nouriel Roubini, told the US Senate that Bitcoin is the “mother of scams and bubbles”.

Is this the end of cryptocurrencies?

Concerned US regulators and the extended rout have dampened sentiment. On Wednesday, Mr Roubini reacted on Twitter to the continued slide: “With BTC [Bitcoin] down almost 80% from peak (from 20K to 4K) & all other cryptocurrencies down 80% to 99% I rest my case that this crypto bubble went bust for good. I feel vindicated. So I will take a break for a few days from this toxic Crypto Twitter. Waste of time to convince zealots.” The US Department of Justice is reportedly investigating whether the Bitcoin rally in December was partly driven by manipulation, Bloomberg reported.