Why 2019 looks like do or die for Bitcoin

Arrow descending on a graph
Arrow descending on a graph

2018 has been tough all round, but the biggest disappointment of all must surely be cryptocurrency Bitcoin.

Future shock

The hype got out of control in the final months of 2017, as the virtual currency grew 18,000% over the year to peak at $18,941 (£14,950) on December 17. At the start of this year, plenty of people were still claiming its value would hit $100,000, or even $1m, but they’ve mostly gone quiet now.

Those lucky enough to get in early may still have made millions, or hundreds of millions. Some had a whale of a time. As happens with investment bubbles, latecomers picked up the tab. I sometimes wonder what happened to that couple who announced they were selling their home to invest all the proceeds in Bitcoin. I hope they still have a roof over their heads.

No relief

2018 did give us four or five relief rallies. But each time Bitcoin’s price peaked at a lower level, and the selling began again. Earlier this month, it crashed to a low of around $3,400. Despite rallying to $4,000, it’s falling again at time of writing. Each relief rally was just enough to convince people that cryptos still have prospects, and hang on just that little bit longer. Hope springs eternal.

So, after losing 80% of its value in a year, Bitcoin and other cryptos, such as ethereum, ripple and litecoin, are at a crossroads. 2019 could be the year they stop the rot and establish themselves, or fade away for good.

Still fearing missing out

I still hold a few coins and, although I’m hanging on just in case, my hopes are low. First, nobody has found a really solid use for Bitcoin. Transactions remain expensive and slow. Bitcoin can only process seven transactions a second, Visa does 24,000. Price volatility makes it pretty much useless as a means of exchange, because you don’t know what it’s going to be worth tomorrow, or even in an hour’s time.

The sector remains very Wild West, with scant regulation and zero investor protection, and suspicions of price manipulation by large active traders. Bitcoin has always been sentiment driven, and sentiment is largely negative right now. I don’t see how that’s going to turn around.

Holding, not buying

At least Bitcoin has shown us what a bubble looks like at first hand, but will we learn? History suggests not. The same emotions that drove Tulip Mania in the 17th century, the South Sea Bubble in the 18th century, and tech stocks in the 20th century, drove the crypto bubble in our century. They will drive the next bubble too.

Tech stocks recovered, finally, so I suppose cryptos might too, which is why I’m hanging onto my remaining bits. This time next year I wouldn’t be surprised if they were worth next to nothing. As for buying, I’d rather invest in the FTSE 100, instead. It’s also had a bad year, but at least the companies listed on the index sell physical objects with practical uses, in contrast to Bitcoin.

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harveyj has holds bitcoin, bitcoin cash and ethereum, and the iShares FTSE 100 and HSBC FTSE 100 Index trackers, but has no position in any other share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.