In November, following a 50% rise in a month, we asked Is this time different for Bitcoin? Since then, prices have scaled new highs, hitting just shy of US$42k per coin, giving the alternative currency a market cap of over US$600 billion, eclipsing the 2017 peak of US$330 billion.
However, Bitcoin and other digital coins tanked on Monday, wiping some $150 billion off the cryptocurrency market. Bitcoin, the largest cryptocurrency, fell over 10% from a day earlier to $34,200, according to Coin Metrics data. Ether, the second-largest cryptocurrency, was down 15% to $1,060.
Bitcoin’s resurgence has been attributed to a number of factors including more buying from large institutional investors, and as investors are increasingly viewing the cryptocurrency as an inflation hedge. The sell-off obviously comes after a huge rally and appears to show investors are prepared to take some profits given the alternative investment's volatility.
Opinions are still divided, in a recent research note, JPMorgan said bitcoin could hit $146,000 in the long term as it competes with gold as an “alternative” currency.
While the UK Financial Conduct Authority urged consumers to understand what they were investing in and the financial risks involved, given they were unlikely to be protected by UK schemes that help investors reclaim cash when companies go bust.
“The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns. Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money,.”