It’s been a grim start to the week for the crypto world. Bitcoin’s value crashed by more than $10,000 over the weekend, with more than $170 billion wiped off the value of the crypto sector’s total market capitalization.
The crash has prompted the United Kingdom’s Financial Conduct Authority to double down on its warning about digital assets — telling consumers who invest in BTC that “they should be prepared to lose all their money.”
On Friday, before the sell-off carnage began, Bank of America Securities had also warned that BTC investors could be “in the mother of all bubbles.” At one point, Bitcoin was close to gaining 1,000% since hitting lows of about $4,000 last year.
Such a surge dwarfs those seen in gold during the 1980s, and dotcom shares during the early 2000s — with Bitcoin “blowing the doors off” past bubbles.
The stark warnings about Bitcoin don’t end here. One of the main reasons why some investors were drawn to BTC in the first place was because of how it can serve as a hedge against a weakening dollar. But according to Mike O’Rourke, the greenback is now beginning to stabilize — meaning this use case has gone out of the window. The JonesTrading chief marketing strategist wrote:
“The Bitcoin chasers here are not protecting themselves versus a dollar meltdown, they are simply paying twice as much for an ‘asset’ than they were at Thanksgiving.”
Even though there’s been a long history of investing crazes — with each asset class eventually crashing down to Earth — many Bitcoin enthusiasts remain convinced that high levels of institutional adoption, and acceptance by the likes of PayPal, mean this cryptocurrency is going to be the exception rather than the rule.
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