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Dec. 19, 2018 / 10:43 AM GMT / Updated 4:07 PM GMT
By Nigel Chiwaya
A year ago it seemed Bitcoin could do no wrong.
On Dec. 17, 2017, the cryptocurrency hit its all-time-high of $20,000 on industry site CoinDesk’s price index. Two financial exchanges opened Bitcoin futures markets, a move hailed as a step toward legitimizing the currency in the eyes of Wall Street, and waves of amateur investors sought to buy into the frenzy.
In a particular show of optimism, one analyst predicted Bitcoin prices would rise all the way to $100,000 in 2018.
That didn’t happen. Instead, Bitcoin and other digital coins plummeted this year, punishing portfolios and sowing doubt about the future of cryptocurrencies.
What happened? In short, the specter of regulation and investor skittishness rocked the market.
The price collapsed, wiping out billions
Bitcoin’s price is famously volatile, often swinging thousands of dollars in either direction in a single day. But that didn’t prepare investors for what happened after the peak. Bitcoin’s price retreated for the rest of 2017 and ended the year at $12,993, according to CoinDesk.
Then came 2018. The currency lost 51 percent of its value between Jan. 1 and Feb. 6, wiping out billions of dollars in market value.
Blockchain Intelligence Group president Shone Anstey attributed the steep drop to skittish investors who bought in during the price craze and then unloaded it as the price began to fall.
“The fear of missing out turned into the fear of losing,” Anstey said. “You had a lot of fast money rushing in. Now we have fast money exiting out.”
The launch of the futures markets, which allow investors to swap contracts to buy and sell Bitcoin at a set price on a later date, also played a role in the price drop, Anstey said.
“It was a perfect opportunity for Wall Street to start shorting it,” Anstey said.
Government regulations also weighed on the currency. In January, Bitcoin prices plunged 19 percent when South Korea’s finance minister said the country was considering shutting down virtual currency exchanges. In March, the currency fell below $10,000 after the Securities and Exchange Commission announced the requirement that digital asset exchanges must register with the agency.
“The incremental regulation snapped energy from the whole cryptocurrency space,” DataTrek Research analyst Nick Colas said. “There was an expectation that we have this new technology and we have a new financial ecosystem. And regulators said not so fast.”
Bitcoin never regained its highs. It spent most of the rest of the year trading between $6,000 and $9,000. Then in late November, the bottom fell out, as Bitcoin‘s price plummeted below $6,000.
All told, the currency lost 84 percent of its value between Dec. 18, 2017 and Tuesday. As of Dec. 18 at 4:30 p.m., it’s valued at just $3,525.05, per Coindesk.
While those who bought at the start of 2017 saw staggering returns, investors who came in later have seen their portfolios dwindle.
One novice investor, Ryan Lackey, started buying cryptocurrencies in December. Lackey, who works as a project coordinator for a document scanning service in California, put $1,500 into alternative currencies Ripple, Tron, and Stellar beginning on Dec. 17, 2017.
At first, his portfolio rose as high as $5,000. But then Lackey converted his entire portfolio to Bitcoin right as the price began falling.
Through trades and dwindling currency prices, Lackey estimates his portfolio is down 90 percent since his initial investment.
Lackey said he views the year as a learning experience. He says he’s made friends in the Bitcoin community, and he continues monitoring the market in the hope that the prices will rebound.
“I’m definitely in it for the long term,” Lackey said. “I’m really hopeful that there’s going to be another big bull run. I know I’ll make money in a legit bull run.”
Lackey considers himself lucky, saying that he could afford to lose his investment. But for those who couldn’t afford the losses, the crash was devastating. In South Korea, where more than two million investors took a chance on digital currencies, young people struggled to cope with the price crash.
“Saxo has [a] policy of not commenting on Bitcoin/Crypto since [January] this year,” Van-Petersen wrote in an email to NBC News.
General interest fizzled
As Bitcoin‘s price fell, so did interest from the general public.
You can see the currency’s fall from public interest at Grace News, a convenience store in New York City that has housed a Bitcoin ATM for more than four years. The ATM, which is tucked away in a back corner of the shop, was heavily trafficked in late 2017,…