Bitcoin and the cryptocurrency sector struggled over the last year, battling through a bear market that’s been branded a “crypto winter” for its debilitating effect on the burgeoning industry.
The bitcoin price has lost more than 80% in value and some $400 billion has been wiped from the cryptocurrency market over the past 12 months as adoption stalls and banks put closely-watched plans to wade into bitcoin and cryptocurrencies on hold.
Now, Matt Hougan, global head of research at the creator of the world’s first cryptocurrency index fund provider, Bitwise Asset Management, has warned that the bitcoin bubble has burst and 95% of the 2,000 cryptocurrencies that exist today will “die a painful and deserved death.”
The bitcoin price has been on a downward trend for the last 13 months after peaking at almost $20,000 per bitcoin in December 2017.GETTY
The bitcoin price has been falling steadily since it hit an all-time high of almost $20,000 in December 2017, forcing many bitcoin, cryptocurrency and blockchain startups to slash jobs or shut down entirely and leaving investors desperate for signals of which way the market will move next.
Bitcoin and cryptocurrency fever gripped the world in 2017, with some major coins, including Ripple’s XRP, ethereum, and litecoin, seeing price percentage increases that far outstripped bitcoin itself.
“It was a massive run-up and a massive pullback,” Hougan told Bloomberg’s Barry Ritholtz’s Masters in Business podcast. “[It was a] total bubble. There are 2,000 cryptocurrencies out there; 95 percent of them are useless and will die a painful death. The sooner that happens, the better.”
Bitcoin’s epic 2017 bull run was largely put down to expectations institutional investment and big bank support for bitcoin would soon arrive. As 2018 dragged on and that investment failed to appear many investors and traders got cold feet, bailing out of their bitcoin and cryptocurrency positions.
The bitcoin price soared from under $1,000 per bitcoin at the start of 2017 but has since fallen back to around $3,400.COINDESK
It wasn’t all bad news for bitcoin and the crypto sector, however, with Hougan predicting the bitcoin sector’s recent rise and fall is reminiscent of the early 2000s dotcom bubble and comparing it to internet giants Facebook, Amazon and Microsoft.
“From those ashes, I think will merge important things. Just like from the dotcom ashes emerged Amazon, Google, Facebook,” Hougan said, pointing to the traditional financial sector’s bitcoin and cryptocurrency hiring spree over the last year.
“The internet … attracted a huge amount of talent, it attracted a huge amount of capital and it had been very painful for investors. The people who jumped on blindly when it already moved aggressively and also volatile highly moving assets encouraged bad behavioral responses as well as bad activity. But it did bring a lot of capital and interest in development to the ecosystem. So, I do think interesting things will be born from that. But it was a difficult year in 2018.”
The dotcom bubble saw a rapid rise U.S. equity valuations fueled by investments in internet companies that had little revenue with the technology-dominated NASDAQ index rising from under 1,000 to more than 5,000 between the years 1995 and 2000.
The bitcoin price fall has dragged the wider market down, with many major digital tokens losing almost their entire value over the last 12 months.COINMARKETCAP
Earlier this week data suggested bitcoin could be in for further pain after five weekly bitcoin price declines in a row, with the cryptocurrency’s trading range at its narrowest since October—which last year heralded its sudden fall from over $6,000 to around $3,500 in a matter of days.
The latest data piles the pressure on bitcoin and cryptocurrency traders after numbers last month showed bitcoin had entered a new selling trend for the first time since mid-November.
Hougan’s comments echo other bitcoin faithful, including Twitter chief executive Jack Dorsey, who remain unconcerned by bitcoin’s steady price decline. Dorsey last week reiterated his expectation that bitcoin would eventually become the internets first “native currency.”
Meanwhile, Hougan also pointed to younger generations affinity for bitcoin and cryptocurrencies, suggesting minennials (those born between the early 80s and late 90s) see bitcoin as digital gold.
“Every generation has an asset that they love or a way of getting exposure that they love,” Hougan said. “The Greatest Generation love gold, then people loved active mutual funds. Gen X loved hedge funds. Millennials love crypto.”