Bitcoin is on its knees, and rather than suggesting, as they once did, massive “high value” buying opportunities, analysts as a collective are becoming increasingly bearish on bitcoin’s future and on non-government-supported digital currencies as a whole.
Bitcoin, the largest cryptocurrency by market capitalization, has lost 30 percent of its value over the past week, having fallen from levels near $6,500 to Wednesday’s live rate of $4,559. The current rate represents a slight recovery from Tuesday’s 13-month low of $4,303.
The past week’s plunge has taken losses for the year to 67 percent, and to 77 percent since a euphoric high of $19,900 was posted last December.
When asked this week on CNBC’s Fast Money show, “Can anything save bitcoin or is there more pain ahead?” trader Pete Najarian was all too clear.
“My answer would be more pain ahead. I think [bitcoin] was a place people used for speculation and now speculation money is going elsewhere.”
“I don’t think we’re going to see the investment in bitcoin that everybody is looking for; I think it goes much further [down] from here,” Najarian said.
For Najarian’s colleague Dan Nathan, one of the big cases made for buying into bitcoin has been its status as a store of value, or as an alternative asset class, useful for when turbulence hits traditional investment vehicles like stocks, currencies, bonds and commodities. It would appear, though, that the idea of bitcoin acting as some kind of safe haven is now thoroughly debunked.
“One of the big bull cases was [bitcoin] as a store of value. And here we are, we’ve had this very volatile equity market in the US, and we’ve also seen Asian equity markets and a lot of other risk assets very volatile in 2018, but [bitcoin] really hasn’t held its value,” Nathan said.
Making a similar argument was UK-based Juniper Research in October. Among its reasons for predicting a crypto industry “implosion,” Juniper cited bitcoin’s inability to gain value in what it saw as extremely favourable conditions, which include a strong dollar environment, global trade tensions, volatility in emerging markets, and government-backed currencies weighed down by political concerns.
“If bitcoin cannot make gains in such favourable circumstances then it is unlikely to prosper as and when these issues are resolved,” a Juniper spokesperson said in October.
Cementing the bearish consensus is Stern School of Business Professor and former White House Senior Economist Nouriel Roubini, who argues for the destruction of bitcoin and its peers based on the creation of national central bank-backed digital currencies (CBDCs).
“If a CBDC were to be issued, it would immediately displace cryptocurrencies, which are not scalable, cheap, secure or actually decentralized,” Roubini argues.