Cryptocurrency’s 80% drop echoes dot-com crash

The Great Crypto Crash of 2018 is looking more and more like one for the record books.

As virtual currencies plumbed new depths Wednesday, the MVIS CryptoCompare Digital Assets 10 Index extended its collapse from a January high to 80 percent. The tumble has now surpassed the Nasdaq Composite Index’s 78 percent peak-to-trough decline after the dot-com bubble burst in 2000.

Like their predecessors during the internet stock boom almost two decades ago, cryptocurrency investors who bet big on a seemingly revolutionary technology are suffering a painful reality check.

The virtual-currency mania of 2017 — fueled by hopes that bitcoin would become “digital gold” and that blockchain-powered tokens would reshape industries from finance to food — has quickly given way to concerns about excessive hype, security flaws, market manipulation, tighter regulation and slower-than-anticipated adoption by Wall Street.

Crypto bulls dismiss negative comparisons to the dot-com era by pointing to the Nasdaq Composite’s recovery to fresh highs 15 years later, and to the internet’s enormous impact on society. They also note that bitcoin has rebounded from past crashes of similar magnitude.

But even if the optimists prove correct and cryptocurrencies eventually transform the world, this year’s sell-off has underscored that progress is unlikely to be smooth.

Wednesday’s losses were led by Ether, the second-largest virtual currency. The value of all virtual currencies tracked by CoinMarketCap.com sank to $187 billion, a 10-month low.

One silver lining of the crypto slump is that ramifications for the global economy are likely to be minimal. Even though the market has lost more than $640 billion of value since peaking in January, that’s a far cry from the trillions erased from Nasdaq Composite stocks during the dot-com bust.