Has the bitcoin bubble just burst?

Cryptocurrencies slump as investors cash-in

Has the bitcoin bubble just burst?
Steve Randall
A massive sell-off of cryptocurrencies saw widespread slumps for the main players Tuesday.

Bitcoin, Ethereum and Litecoin all tumbled while some of the lesser-known cryptocurrencies saw their value fall sharply, some by as much as 50% before stabilizing later in the day.

That means that bitcoin, which surged past U$20,000 at times in recent weeks, was worth $10,500 in the early hours of Wednesday.

Why’s it happening?
The value of bitcoin and other cryptos has been rising sharply in recent months and many analysts have sounded alarm bells over a ‘bubble’.

One of the elements of cryptocurrencies that is most attractive for many investors is also one of its largest weaknesses; the fact that it is unregulated.

The potential for regulation either in some regions or internationally is an ever-present headwind for the sector and a report that regulators in Asia, where cryptocurrencies are particularly popular investments, are planning to restrict trading exchanges.

China and South Korea may both bring in new rules and the market is concerned about the impact.

The losses
Investors in bitcoin have seen its value rise sharply but the downturn Tuesday has wiped an estimated $100 billion off the value, meaning around a 40% drop for anyone holding the coins since their peak.

Then pull-back from cryptos could be good news for gold. Digital currencies are often compared to gold despite the latter’s physical appeal which is obviously lacking in cryptos.

What next?
That’s anybody’s guess really.

If the sell-off continues then the pre-Christmas frenzy of demand may dissipate, but perhaps interest in cryptos will drive further investment in blockchain, the underlying technology of digital currencies, which has widespread appeal and uses across industry sectors.