In early December 2017, I bought bitcoin for £ 1,000 when it was $ 12,000 per coin. The value has since dropped and wiped out around three-quarters of its value.
I knew it was a speculative punter and it went well in the beginning – it went to $ 20,000 in the days before Christmas. I thought that was the only way.
Why has the price of bitcoin and other large cryptocurrencies fallen? And what should I do – sell now in case it fades away, or continue to wait for a potential return?
Bitcoin has entered his latest bust cycle, which has seen its value fluctuate around $ 3,300 per coin mark
Myron Jobson from This is Money replies: If you invest, the temptation is to do something that you are not well at home and that falls under the banner with the high risk & # 39 ;, with the promise to return a neat sum when the hype is realized .
Bitcoin was the gamble for many budding investors in the run up to Christmas last year when apparently everyone from your dentist to taxi driver and even your dog was barking about the original and best known cryptocurrency.
But the mania of 2017, which saw the price of bitcoin rise at the beginning of the year from only $ 20,000 to less than $ 1,000, made way for a failure after Christmas.
Apart from a few short-lived rallies, bitcoin has since been mainly on the slide.
At the time of writing, bitcoin was worth $ 3,400. This means that it has dropped almost three-quarters compared to what you paid for it a year ago and 83 percent lost its peak.
And it is not just bitcoin that has endured a scorching 12 months. The price of ethereum dropped by as much as 94 percent from its peak of more than $ 1,400 in mid-January to $ 88 per currency.
This is not to say that there is no value in cryptocurrencies. Blockchain, the technology behind cryptos is impressive and can become a mainstay in the future.
But the sinker in bitcoin – and other cryptocurls – shows that because something has value, it does not mean that it can not be massively overvalued and end up in a bubble.
Probably many beginning investors in the run up to last Christmas have taken a punt and are now heavily burned.
What is Bitcoin?
Bitcoin is a type of virtual currency that is free from government interference and can be shared directly online.
In order to ensure that the system has value, more than 21 million bitcoins can never be made, so values can fluctuate strongly depending on supply and demand.
The underlying technology is blockchain, a financial ledger that is maintained by a network of computers that can track the movement of each asset without the need for a central regulator.
Why did the price fall?
This is a real question how long a string question is.
The jury is out about the cause of the fall in the price of bitcoin.
Increased regulatory control is a frequently cited reason.
Bitcoin declined 40 percent in mid-December relative to the peak, while other cryptocurrencies suffered similar losses due to investor fears that regulators would crack down on speculation.
Over the year, the price fell to a low of $ 5848 in July, but managed to maintain a period of relative stability, trading between $ 6,000 and $ 7,000 thereafter through October.
Bitcoin has since landed in its latest buster cycle and has seen its value falter around $ 3,300 per coin.
So-called cryptocurrency experts attribute part of the debt to enforcement action by the US Securities and Exchange Commission – the US financial watchdog – against start-up cryptocurrency companies Paragon and AirFox for unregistered securities sales in November.
The launch of a study into whether cryptocurrency Tether and crypto exchange Bitfinex has manipulated the price of bitcoin with the help of unscrupulous and illegal market tricks from the US Department of Justice in the same month will probably also have contributed to the recession.
In addition, a large part of the speculation concentrated on bitcoin money – an offshoot of bitcoin. Bitcoin money was earmarked in August 2017 to be its own cryptocurrency.
However, bitcoin cash has now been split into two separate currencies that have been competing effectively with each other since last month.
Bitcoin money is now known as bitcoin ABC and the new & # 39; fork & # 39; is called bitcoin SV.
Do you have to sell now?
It is difficult to give a definitive answer to this question, because cryptocurrencies are relatively new and investment experts are still trends and deviations on the spot market.
Bitcoin, the best known, was founded ten years ago by a mysterious Satoshi Nakamoto who published a white paper describing an electronic money system that would yield bitcoin.
Last year, speculation that the launch of bitcoin futures – contracts for assets bought at agreed prices but delivered and paid for later – would attract investments from institutional investors led to the sharp rise in the price of bitcoin.
The hype generated by beginning investors and FOMO (fear of missing) helped to further increase the price of bitcoin.
Some analysts say the price of bitcoin is unlikely, just like last winter, because incentives do not crop up.
Jason Broomer from Square Mile Investment Consulting & Research gives a more destructive assessment.
I value bitcoin and prefer to invest in Zimbabwean dollars
Jason Broomer – Square Mile Investment Consulting
He said: & # 39; I appreciate a bitcoin and I prefer to invest in Zimbabwean dollars.
Zimbabwean dollars offer at least a valuable result, thanks to the credibility of the Zimbabwean government – although we have a very thin veneer here.
& # 39; There is no way to value bitcoin and the price movements reflect only the demand and supply of speculators and & # 39; investors & # 39 ;.
"Gold is problematic to appreciate in the same way, at least gold as a currency has credibility that goes back to the dawn of mankind. & # 39;
But crypto-purities say that emerging technologies with radically new ideas will always see fluctuations in their value.
Mati Greenspan, senior market analyst on investment platform eToro, said: & # 39; In the past nine years, the crypto-asset market has undergone five major corrections with an average average value of 85 percent.
Bitcoin has dropped 83 percent from its peak of almost $ 20,000 in mid-December to $ 3,400 (as on December 13)
& # 39; On this occasion, bitcoin should drop to $ 2,950 for the same 85 percent drop.
& # 39; Although all eyes were focused on the ongoing & # 39; crypto-winter & # 39 ;, blockchain projects continue to build momentum, institutional interest in crypto-assets continues to grow and technological advances in space are constantly being made. & # 39;
But this view is demonstrably self-sufficient because it comes from an analyst of broker acting in cryptocurrency.
Beware of panic
There is an interesting discussion thread on the social media website Reddit about 'panicking' & # 39; to bitcoin in the hope that it will regain its losses one day.
One user wrote: & # 39; Panic keeps all the way to the bottom, yippekayeeeey & # 39 ;. Another wrote: & # 39; Can not make a loss if you do not sell fun. & # 39;
In fact, it is difficult to hit the sales button of an investment – even if you have made a profit for fear of getting out of it before it reaches its peak.
Redeeming a declining investment is even more difficult because it involves accepting an error, giving up all hope that the investment call will be good and it will crystallize out a financial loss.
For conventional shares and units, there are some statistics that you can use to help determine whether a share is a winner or a duddle, including the price / earnings ratio and return on equity.
The valuation of bitcoin and other cryptocurrencies does not work in the same way, but if you look at factors such as the number of transactions per day, the costs of transactions and the mining of the crypto, you can get an idea of what they are worth.
This kind of information is not always immediately available and it may be that you have to dig a bit of serious time.
If, after doing your own research, you think you have called the wrong time on bitcoin, do not wait and add the error together. The best investors will not keep a share if they have understood their mistake.
After all, a bad investment that has substantially declined is less likely to recover your money than a good investment.