Bitcoin loyalists feeling pinch of epic plunge

Dubai - About $70 billion was wiped out from the cryptocurrency market in November alone

Looks like the forecasts are coming true for Bitcoin; it's really testing the patience of its investors and ever-loyal evangelists.
But this isn't the way they expected it to be as the world's largest and most popular cryptocurrency approaches its 10th birthday.
On Friday, Bitcoin fell again, this time as much 7 per cent, and is on track for a one-year low as a less-than-inspiring combination of circumstances continued to hit the market.
The last time Khaleej Times made a feature on cryptocurrencies on August 13, the sector's market capitalisation was at $208.4 billion. At Friday's close, it was down to $131.44 billion - a further plunge of almost 34.6 per cent.
That was also the same time analysts expected Bitcoin - which started on January 3, 2009 - to drop to the $4,000 mark.
Spoiler alert: it did go below that mark the past several days. According to CoinMarketCap, Bitcoin closed at $3,880.76 on November 24, the first time it was in the $3,000 mark since September 26, 2017. It hit an intraday low of $3,585.06 on November 25 and its lowest close was a day after at $3,779.13.
About $70 billion was wiped out from the cryptocurrency market in November alone. Ripple, the second-largest, lost 18 per cent, while Ether dropped 43 per cent in the same month.
"A fall from almost $20,000 to $4,000 is a complete crash," Hussein Sayed, chief market strategist at FXTM, said in an analysis this week sent to Khaleej Times.
He cites the argument that some may say that similar corrections have been experienced before, most notably when Bitcoin's price dropped from $1,150 in December 2013 all the way to $300 over a year later.
The key difference, he points out, is the market cap.
"Back then, investors may have lost $9 billion," Sayed added. "However, this year's move has wiped out $250 billion from its peak."
And while Bitcoin is indeed still hovering near $4,000, that's a far cry from its peak close of $19,497.40 on December 16 last year. Take into account its Friday price of $$4,017.27 and that's a headache-inducing 79.4 per cent knock.
It did regain some ground on Wednesday when it rallied 5.6 per cent to $3,980, its best climb since July 24 according to Bloomberg. That also pared November's rout to "only" 35 per cent.
On the bright side, the "cheapness" of cryptocurrencies nowadays can be an opportunity for those who can still consider the upside in them.
"What we are seeing is not yet a bottom but a short-term buying opportunity," Jehan Chu, managing partner at Kinetic Capital, said.
"Until we have broader adoption of decentralised applications, it will be hard to find a firm floor."
Bitcoin - and the entire cryptocurrency industry in general - is no stranger to bubble bursts. Year-to-date, it has dived 70.9 per cent, which is still "low" by standards: in 2011, in endured a 92 per cent free-fall, while from 2013-15, it lost 84 per cent, thanks largely to the collapse of Tokyo-based exchange Mt Gox.
To illustrate Bitcoin's dramatic fall from grace, CNBC came up with a startling comparison: if you invested $1,000 in Bitcoin in January 1, 2011, you'd have $4,281,220 today.
On that same day this year? A measly $318.
The cryptocurrency market is also feeling the squeeze of tighter regulatory scrutiny. On November 20, Bloomberg first reported that the US Securities and Exchange Commission was investigating whether last year's epic rally was fuelled, in part, by manipulation.
The investigation - which is actually a criminal probe that was opened months ago - is a serious look into suspicions that a "tangled web" involving Bitcoin, Tether (another cryptocurrency) and the exchange Bitfinex might have been used to illegally move prices.
The action was prompted by a June research paper from the University of Texas. J.L. van der Velde, who is CEO of both Tether and Bitfinex, had already shot down the findings.
And so-called "endorsements" aren't doing them good either.
On Friday, boxing superstar Floyd Mayweather Jr and music producer DJ Khaled were both charged by the SEC for failing to disclose payments they received for endorsing ICO investments on social media. While they neither confirmed nor denied the charges, the two men agreed, according to an SEC statement, to pay a combined $767,500 in fines and penalties to settle the matter.
"Social media influencers are often paid promoters, not investment professionals, and the securities they're touting regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds," Steven Peikin, a director at the SEC's enforcement division, said.
Still, there are those who believe the market hasn't bottomed out.
"There's still a lot of people in this game," Stephen Innes, Asia-Pacific head of trading at Oanda, said.
But like that $4,000 mark we watched out for three months ago, he has another figure that should keep the market on its toes.
"If we start to see a run down toward $3,000, this thing is going to be a monster," he warned. "People will be running for the exits."
- alvin@khaleejtimes.com