Bitcoin Price Was At An All-Time High Today Last Year. What Went Wrong?

Bitcoin's slide from its all-time high this time last year (Credit: Coinmarketcap)

A year ago, bitcoin price hit an all-time high, coasting from $10,000 to closing in on the much-anticipated figure of $20,000 in less than a month. Back then, the future for cryptocurrency markets seemed bright and the mood was euphoric. 

The scenario is starkly different a year later. A somber mood has replaced euphoria. Perhaps, bitcoin’s price action today, when it popped briefly before reverting back to its losing stream, encapsulates this year. Crypto markets have had brief glimmers of profit and have mostly been shrouded in losses for most of this year. 

As of this writing, bitcoin is down by more than 85%. The drawdown in other cryptocurrencies is even worse. For example, Ripple’s XRP and ethereum’s ether – the world’s second- and third-most valuable cryptocurrencies – are both down by more than 90% from their all-time highs at the beginning of this year. 

What Went Wrong? 

Several factors are responsible for the decline in cryptocurrency markets. Hacks and scandals have played their part, scaring traders and investors away from cryptocurrencies.

The SEC’s dire warnings against initial coin offerings (ICOs) and increased crackdown on suspect projects have deterred entrepreneurs and investors and killed off the ICO market. The federal agency has also refused to approve a bitcoin ETF, which would have provided much-needed liquidity to the cryptocurrency ecosystem. Meanwhile, thin trading volumes and markets means that bitcoin whales and pump-and-dump schemes continue to hold sway in determining crypto prices. 

A Brighter Future Ahead?

Regardless of the market losses, the future might hold surprises for bitcoin price and cryptocurrencies. “If you look at the long-term fundamentals of this asset class, things haven’t changed really,” said Ryan Selkis, founder of Messari Crypto – a research firm. He pointed to positive developments within the ecosystem, from development of layer 2 solutions, such as Lightning Network, that take transactions offline to increase the blockchain’s processing capability to the increase in tools and developer activity on these platforms. 

Institutional money is also making its way into cryptocurrencies, with several prominent names like Fidelity Investment and NYSE owner ICE making significant announcements for cryptocurrency-related products. Some have also posited that a bitcoin ETF might be approved next year.

Appearing on CNBC, Spencer Bogart, partner at Blockchain Capital, said bitcoin doesn’t have the price-to-earnings ratio and price-to-revenue upper bound limitations that typically characteritize valuations for early stage technology companies. He said bitcoin could hit $50,000 but refused to venture a timeframe for that prediction.