Has Bitcoin bubble burst?

AS WORLD stock-markets have faltered, one asset class has done even worse — cryptocurrencies. ‘Bitcoin has fallen more than 50pc since November, taking its value to an

18-month low,’ says Victoria Scholar from Interactive Investor.

The crypto crash will bring heavy losses for the more than 2 million Britons who own cryptocurrencies. Those that hold alt-coins — such as Solana, Cardano and Dogecoin — will have fared even worse, with 70-80pc losses, leaving just a fraction of the initial investment.

The Bank of England has long warned that crypto investors risk losing their money, but it has done little to deter buyers.

A 2021 survey by investment platform AJ Bell found that UK savers were more likely to have bought Bitcoin than opened a stocks and shares ISA. Much of Bitcoin’s initial appeal came from its reputation as ‘digital gold’ that would hold its value if excessive moneyprinting triggered inflation.

Yet as the world economy faces the biggest inflationary test for decades, Bitcoin is well and truly failing its own test.

While gold has held its value (rising 2 pc this year), cryptocurrencies have fallen even faster and steeper than mainstream assets — with Bitcoin losing 17pc this month alone.

It suggests cryptocurrencies were held up by cheap money and market optimism — making them the ultimate bubble.

Bitcoin fans will of course point out that the digital asset has plummeted before, only to rise from the ashes — like in the crypto crash in February 2020, when Bitcoin fell 40pc before going on to gain 500 pc in a year.

Judging by the money in the market, though, this crypto crash stands to be the most brutal yet. Any recovery would depend on even more willing investors happy to pump in extra money — and there are likely to be fewer of those around this time.