Feel safer with Footsie
ANYONE who never quite got the point of Bitcoin and other so-called crypto-currencies may now feel vindicated as they have been almost obliterated this year.
Bitcoin has fallen by around 60 per cent since topping $67,000 (£55,375) six months ago, to trade at around $27,000 at the time of writing.
The total crypto market, which includes other digital currencies such as Ethereum and Dogecoin, lost more than $800billion (£656.4billion) in market value in the last month alone, according to data from Coinmarketcap.
The market is still valued at £1.3trillion in total, but could shrink further as global volatility continues. So are we finally witnessing the death of Bitcoin?
Plenty of people would be happy to see Bitcoin vanish for good, given that it still offers little in the way of practical value, while mining the virtual coins on computers generates more greenhouse gas emissions than Bangladesh.
It has also fuelled a get-rich-quick online trading culture, which has turned a handful of early investors into billionaires, and made millions of latecomers poorer.
Bitcoin is now falling due to “the chaotic combination of interest rate hikes, fears of an imminent recession and
military conflict in Europe”, said Sam Kopelman, UK manager of global cryptocurrency exchange Luno.
This could mark a long-term bear market for crypto, he said, and urged investors to resist the temptation to buy in the current dip in the hope of profiting from a rapid recovery. “Bitcoin’s tumbling price may not be over just yet. Support may be found at $20,000,” he said.
Yet Bitcoin has fallen sharply before only to recover just as rapidly, and it is too early to write it off. Cryptos are falling for the same reason as other high-risk, high-reward assets – because investors are getting nervous and are unwilling to take many risks.
New York’s Nasdaq index of technology stocks has plummeted 30 per cent this year.tech growth stars such as Netflix, Facebook and Amazon now face a much tougher trading environment as recession fears grow.
Customers are being squeezed by the cost-of-living crisis, while borrowing costs are rising as central bankers hike interest rates to curb inflation.
The crash has destroyed one myth about Bitcoin, that it is now a safe haven in times of trouble. Instead, it is at the centre of the global storm.
Two other historical safe havens, gold and silver, have also fallen, said City Index market analyst Fawad Razaqzada: “Like Bitcoin, they are struggling because they don’t give investors any interest or dividends.”
Yet one global stock market has shrugged off the worldwide slowdown to hold steady this year, the UK’S very own FTSE 100. Blue-chip stocks on the index, such as BP, Lloyds, Persimmon, Unilever and Vodafone, pay some of the most generous dividend income in the world, protecting investors against inflation.
The FTSE 100 is down less than 5 per cent year-to-date, which is good news for millions of Britons with money invested in pensions and stocks and shares Isas. In contrast to Bitcoin speculators, they have been shielded from the worst of this year’s crash.
Let’s hope that continues, and the boring old Footsie continues to smash over-hyped cryptos.