Bitcoin is back in the news again, but not for the reasons investors may be hoping. After hitting an all-time high of more than $3,000 per coin in June, the cryptocurrency, and others like it, are once again in free-fall. Few expected the incredible boost to last forever, but its plummeting value has a lot of people saying “I told you so.” Now, many people are taking a long look at the commodity to decide if Bitcoin is ultimately worth their time and money.
In May of this year, Bitcoin fell nearly 19 percent in value, for a total loss of almost $4 billion. In addition to Bitcoin’s plunge, another popular cryptocurrency, Ethereum, lost a whopping 48 percent of its value in a little over a month. This kind of volatility has always been a problem for cryptocurrencies, but the latest example is enough to have many rethinking its future. Regardless of any hiccups in the market, it hasn’t been enough to scare people away entirely.
Investors still value cryptocurrencies as a whole at close to $82 billion. For a largely untested commodity, this is downright bananas. To put that number in perspective, the same amount of money could purchase nearly all of Volkswagen— including Porsche, Bugatti, and all the other brands under the VW umbrella. What’s crazier is that this value is largely driven by speculation as opposed to any intrinsic value in the currency itself. Even so, it’s hard to argue with success.
Since its humble beginnings, Bitcoin has steadily become a more ubiquitous presence in the modern marketplace. The currency is accepted by more than 100,000 different merchants worldwide and continues to grow as an acceptable payment in a variety of industries. In late 2016, the first online casinos began to allow customers to fund their accounts using Bitcoin. This kind of tacit approval lends more credence to the validity of cryptocurrencies and encourages further adoption. The usage of Bitcoin and other digital monies has become widespread enough that there’s little fear of them actually disappearing, but it should discourage excessive bullishness from investors.
What has happened to the value of Bitcoin over the last month is not an isolated incident, nor will it likely be the last time this happens. While it’s generally treated as a commodity by the U.S. Commodity Future Trading Commission (CFTC), it’s a far cry from the relative stability of something like gold or oil. They say that with great risk comes great reward, but this kind of unpredictability makes it a tough sell. The rest of 2017 will be a fascinating ride for Bitcoin, but it will be incredible if it manages to top $3000 again.
When it comes to viability as a long-term investment strategy, Bitcoin is still too much of an unknown quantity to put too much stock into it. More respected financial institutions have begun to dip their toes into the waters of cryptocurrency, but this recent roller coaster will probably be enough to curtail their enthusiasm. It’s likely Bitcoin will raise in value again in the future, but at this point everything involving cryptocurrencies should be taken with a healthy grain of salt.