Bitcoin Selloff Undermines Case for Cryptocurrencies

Bitcoin Selloff Undermines Case for Cryptocurrencies

Bitcoin bulls sitting on massive long-term gains might be able to laugh off the most recent selloff in it and other cryptocurrencies, but the episode still exposes flaws in the argument for bitcoin as a true substitute for sovereign currencies.

On Wednesday morning, bitcoin was down about 20% over the previous 24 hours. That has brought bitcoin’s price in dollars down to levels not seen since…just a few months ago. Someone who bought the cryptocurrency two years ago would still have more than tripled their money. A five-year holder is sitting on gains of over 6,000%.

For many speculators, that record will be enough to justify holding on or buying the dip. But its historic gains rest at least partly on the prospect that it will someday rival major currencies as a store of value and medium of exchange—in other words, a true currency. Events this week serve as a reminder of why that is far from assured.