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Lessons from the boom-and-bust wild run of bitcoin
December 05 2018 12:53 AM
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For all the euphoria of 2017, the great crypto crash of 2018 is plunging deeper.
Bitcoin has registered its biggest monthly decline in more than seven years as investors re-evaluate the prospects of digital money. 
The biggest cryptocurrency dropped 6.1% to $3,930 on Friday, bringing its monthly loss to 37%. Other leading digital currencies have extended their slide, too. Ether declined about 3% to $111, bringing its monthly loss to 43%. XRP slumped 4.1%, pushing its monthly loss to 21%.
Bitcoin surged to a record $19,511 in December 2017; now it’s nosedived around 82%.
The initial hyper-libertarian vision for bitcoin was to create a form of money free from government or corporate oversight. But bitcoin and its peers suffer from “a range of shortcomings” that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest – and investment – in the would-be asset class, according to the Bank for International Settlements.
An area of excitement about bitcoin is blockchain — the technology used for verifying and recording transactions that’s at the heart of bitcoin. While blockchain does provide some benefits for the global financial system, the BIS said in one of its most withering caveat in June that as the size of blockchain ledgers swell, it would eventually overwhelm everything from individual smartphones to high-tech servers, ultimately bringing the Internet to a halt. 
The financial world, for sure, is growing warier of the highly volatile digital currencies.
The Qatar Central Bank (QCB) in February issued circulars to financial institutions in the country warning of the risk of trading in bitcoin and other digital currencies, and asking them not to open any accounts for trading in cryptos.
Banks in Britain and the US have banned the use of credit cards to buy bitcoin and other cryptos fearing a plunge in their value will leave customers unable to repay their debts.
India’s top court in July refused to overturn a central bank ban on digital currencies, effectively outlawing such tokens in Asia’s third-largest economy.
Support from financial institutions and pension funds are seen key to increasing the digital currency’s price. But regulators around the world have stepped up scrutiny of cryptocurrencies on concern that they’re a breeding ground for illicit activity, including money laundering, market manipulation and fraud. 
After an epic rally last year that exceeded many of history’s most notorious bubbles, cryptocurrencies have become mired in a nearly $700bn rout that shows few signs of abating.
In 2017, Bitcoin led a motley pack of cryptocurrencies in one of the great booms in market history, soaring 1,400%. In 2018, it’s led an epic bust that rivals the dot-com era stock market collapse. 
And the crypto rout this year is showing up how investors can bleed to death if they bet on a concept with no intrinsic value. 
Amid concerns over transparency, bitcoin’s boom-and-bust wild ride offers yet another historical lesson to a discerning investor: Any short-term windfall return that defies fundamental market wisdom is bound to end up in a crash.



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