Remember Bitcoin? Some investors might want to forget
NEW YORK: At the end of 2017 a toy called a Cryptokitty sold for $170 000 (R2.46m).
A real estate agent remade himself as CoinDaddy, producing cryptocurrency-themed music videos.
The man behind a company called Ripple became for a moment richer than Mark Zuckerberg. Kids barely out of high school were buying Lamborghinis because of a crypto meme. Experts said Bitcoin was going to reach $100 000 a coin.
For a few months of 2018, all of Silicon Valley was wrapped up in frenzied easy money and a fantasy of remaking the world order with cryptocurrencies and a related technology called the blockchain. The New York Times ran with the trend in an article headlined “Everyone Is Getting Hilariously Rich and You’re Not.” And just as the public had been given every possible blockchain explainer that could be written, the bubble burst.
At the end of 2018, the price of Bitcoin – $19 783 the previous year – was $3 810. Litecoin was $366 a coin; it’s now $30. Ethereum was $1 400; today it’s $130.
So cryptocurrency’s most exciting year ended in a terrible, sober headache. Those who have stayed are calling this “the winter of crypto.”
Believers say this is only “the trough of disillusionment,” pointing to a chart that posits all new technology goes through a similar trough before exploding into inevitable glory.
Those still chipping away at crypto dreams insist that this is all a good thing because only the serious ones, the true crypto believers, remain.
“It’s painful to lose money, but it’s a necessary step,” said Robert Neivert, an investor with the venture capital firm 500 Startups; “2018 was about moving from hype to product.”
This year, the blockchain industry – a subset of the cryptocurrency industry that would very much like to live on its own – went through a Cambrian explosion. But first, an explanation of the blockchain: A blockchain is a relatively new kind of database that was initially introduced with Bitcoin. It is not the digital currency. It is the underlying technology that helps manage the currency. Most important, it is decentralised so no one person, government or business controls it.
Blockchain became a solution for everything – blockchain for journalism, for pot, for dentists. At the kernel of it all was real technological progress and a growing understanding that this decentralised technology could transform financial systems. But the excitement spun out of control.
Even adding the word “blockchain” made stock soar. When Long Island Iced Tea changed its name to Long Blockchain, its stock went up 500% in a day.
Scammers flooded the space, launching dubious new investment schemes called “initial coin offerings.”
The computing power needed to “mine” a Bitcoin or other cryptocurrency is now sometimes costing more than that coin is worth. Mines – actually, they are electricity-needy data centres – are shutting down. Images of electronics piled up on street corners are going viral. As demand for Bitcoin has dwindled, Bitcoin’s algorithm has adjusted and the coin has become easier to mine.
Some in the cryptocurrency business would just like the world to know that there are still people working on it. Julian Spediacci, a cryptocurrency investor in San Francisco with his twin brother, James, said he would like people to know that he is still alive and identifies as a HODLer, or someone who is not selling despite market fluctuations.
When Kerry Washington, a member of the Litecoin Foundation, which promotes Litecoins, gave a presentation about the year, in which the coin lost more than 90% of its value, he talked about a big Litecoin summit this year, which he specified cost a quarter-million dollars.
There, guests could buy candy with Litecoins. This showed everyone how useful Litecoin could be, he said.
The trouble was always that we already have something that lets us buy candy. | New York Times