In December I wondered whether the price of Bitcoin would reach $30,000 by Christmas. One thing I was convinced of is that it was heading for a fall. I just didn't know when, but we do now.
Since peaking at $19,500, Bitcoin crashed by more than 50% to $9,200. It's currently trading at around $11,600 per coin, but does than mean it's holding up and will fly again, or should you avoid it like the plague? Big investors are split on the question.
Cameron and Tyler Winklevoss were canny enough to invest $11m in Bitcoin back in 2013, when it cost them just $120 per coin. At the peak, their holding was worth over $1bn. They've lost a fair chunk of that now, but I expect they'll scrape by.
The twins are apparently in it for the long term, with Tyler telling the New York Times: "We still think it is probably one of the best investments in the world and will be for decades to come."
Thinking back on the dotcom bubble which saw similar booms and busts, the very best internet companies went on to do extremely well, so he might have a point.
Pitted against them is Warren Buffett, who told CNBC: "In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending." He said he'd be happy to buy a five-year put on them if he could, but he'd never short. That makes sense with something so volatile -- a renewed short-term surge could wipe out shorters.
In 2008, Jean-Paul Rodrigue produced his famous 'phases of a bubble' chart, which shows smart investors (like the Winklevoss brothers) getting in well ahead of the crowds, and peaking when the general public catches the infection and piles in.
His chart shows a brief fall after that, followed by something of a recovery, before the real crash sets in. Spookily, the Bitcoin price chart pretty much matches that exactly so far, suggesting we could be in for the big crash phase any day now.
Dan Novaes is co-founder and chief executive of blockchain platform Current Media. He's bullish over the long-term prospects, which you'd expect, saying that he understands and believes in the technology behind it.
The thing with currencies, and gold (with which Bitcoin has been frequently compared), is that their value depends on the scarcity of supply.
If you print currency the way Zimbabwe did, you'd soon end up needing a wheelbarrow to carry the price of a loaf of bread (if you can find something big enough to carry the price of a wheelbarrow in the first place).
For its scarcity, Bitcoin (and other cryptocurrencies, like Ethereum) depend on the complexity of its mining algorithm. That in turn relies on the limitations of current computing power and the energy needed to run them. In November, the energy being used to power Bitcoin mining was estimated to be higher than the consumption of the Republic of Ireland -- and it's rapidly heading higher.
But does anybody really think that computing power is not going to expand dramatically in the long term, and its energy requirements fall?
This time next year, I reckon those speculating on Bitcoin will be ruing their rash decision.
Yes, I think buying Bitcoin would be a big mistake, though it is a relatively easy one to avoid. But many common investing mistakes are so easy to overlook that everyone makes some sooner it later. Even Warren Buffett!
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