Bitcoin Has Lost Half Its Value In 2018
Bitcoin bulls had an exceptional 2017, with the price of the cryptocurrency increasing more than twelvefold on the year. Unfortunately for bitcoin investors, 2018 has belonged to the bears.
After another tough month in March, bitcoin has now lost roughly half of its value since Jan. 1 and approximately two-thirds of its value since hitting an all-time high of about $20,000 in December. At this point, the bitcoin sell-off has exceeded the 57 decline the Standard & Poor's 500 index made during the 2008-2009 financial crisis.
[Read: What You Need to Know About Bitcoin and Cryptocurrency.]
Bitcoin bulls argue that the volatile cryptocurrency has a long history of huge spikes and deep pullbacks and that its long-term trend is still higher. Bitcoin bears argue that governments are starting to step in with more regulations and oversight due to the large number of cryptocurrency scams, and trading action in the cryptocurrency markets in late 2017 exhibited textbook signs of a financial market bubble.
Online advertising leaders Alphabet (ticker: GOOG, GOOGL), Facebook ( FB) and Twitter ( TWTR) have banned all cryptocurrency-related advertising on each of their platforms, citing user safety as the primary concern.
Fundstrat Global analyst Thomas Lee says that the mood in the cryptocurrency market is extremely negative. However, for long-term investors who believe that cryptocurrency has a big future, Lee says bitcoin has a great chance for success due to its liquidity.
"It's kind of boring because it's not the latest, most exciting project," Lee said on CNBC. "I think when institutions start to get involved--and they aren't in a big way--bitcoin is going to be one of the first places they start."
Stefan Hofrichter, head of global economics and strategy at Allianz Global Investors, recently said bitcoin's fall should come as no surprise.
[Read: What's the Best Bitcoin Wallet?]
"Bitcoin meets all of the essential criteria for any asset-class bubble, including overtrading, a lack of regulation and the potential for swindles," Hofrichter wrote in early March. "Bitcoin has no intrinsic value: it is a claim on nobody -- unlike sovereign bonds, equities or paper money -- and doesn't generate any income."
The U.S. Securities and Exchange Commission has said it will not approve any cryptocurrency exchange-traded funds for listing on a major U.S. exchange until fund operators can convince the commission that investors will be protected. The Bitcoin Investment Trust (GBTC), which trades over the counter, is down 52.6 percent in 2018.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
