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Bitcoin is crashing all over again, and it is taking the smaller crypto currencies down with it. It has fallen by a quarter from its highs, and there is little sign that the relentless selling is going to stop anytime soon. Plenty of people will be reheating arguments about how the digital currency is completely worthless and that the bubble was always going to pop one day. But Bitcoin has been through plenty of bear markets and it has always bounced back – and there is little reason to believe this crash will be any different.
It is certainly a substantial fall. From a high of $114,000 a coin at the end of last month it has fallen all the way back to $83,000. It has been just as bad for the other crypto currencies, such as Ethereum and Dogecoin. The Melania meme coin, named after the American First Lady is now down by 98 percent from its highs, which is probably provoking a few frosty stares at the White House. Plenty of people will be quick to start writing off Bitcoin. It has no real value as an asset, we will be told, and the bubble was always going to burst one day.
Interest in Bitcoin is no longer confined to just a handful of slightly wild-eyed enthusiasts
And yet, booms and busts are now an established part of the crypto cycle. Bitcoin has been through four major bear markets. In 2011 it crashed by more than 90 percent; in 2014 to 2015 it fell by more than 80 percent; in 2018, the so-called crypto winter, it again fell by more than 80 percent; and then in 2022 it fell by more than 70 percent. It has also suffered numerous corrections, defined as a fall of 20 percent or more. Volatility is baked into the asset. That does not, however, mean it has no value or that it won’t recover.
In the background, Bitcoin has been moving more and more into the mainstream. The US is planning a strategic Bitcoin reserve, and the plan now has the full backing of the White House. With the launch of funds, retail investors can buy and sell crypto currencies in the same way they trade shares. Even the very conservative Financial Conduct Authority in the UK has started opening up the British market to crypto investment. Major banks such as JP Morgan Chase are now willing to accept it as collateral for loans.
Add it all up, and one point is clear. Interest in Bitcoin is no longer confined to just a handful of slightly wild-eyed enthusiasts. Instead, it has moved into the mainstream financial markets. The price may well keep falling for the next few weeks. But the lesson of the last fifteen years is very clear: Bitcoin has always bounced back and reached new highs very quickly.
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