A year ago, US crypto investors were looking forward to a triumphant Thanksgiving. Bitcoin was trading at about $8,200 and, after a minor October correction, heading north again. There could be no better time for gloating in the face of a naysaying uncle or convincing a reluctant cousin to invest than while sitting around a table and giving thanks.
Much has happened since, and little of it good for crypto investors who didn’t sell near the top. After cresting $20,000 in December, bitcoin has been in a steady slide that sped up alarmingly in the past few weeks, falling 25% since Nov. 7 and giving up a year’s worth of gains. On Monday (Nov. 19), bitcoin fell below $5,000 for the first time since October 2017. As of this writing, it was trading at $4,595.
At this year’s Thanksgiving, uncles will have the “I told you so” smirk, cousins will be tossing blame across the cranberry sauce, and investors will try to change the conversation to something, anything, other than their crypto woes.
There’s no one reason for the sell-off, but a few factors have been working against bitcoin and its cousins like ether (ETH) and ripple (XRP). Fallout from the bitcoin cash fork—the crypto world’s equivalent of financial engineering—seems to be creating uncertainty across all cryptocurrencies, while recent SEC enforcement actions may be adding another layer of chill. The crypto markets may also be finally catching up with other asset classes that have stumbled over the past month; fears of a trade war and the prospect of an economic downturn have investors everywhere asking whether the good times are going to end sooner rather than later. As equities start to head south, crypto-investment dabblers may figure it’s time to cut losses in their riskier hedges.
The plunging price of bitcoin has left some investors disconsolate, and crypto boosters offering the Twitter equivalent of a group hug.
But for crypto skeptics—notably NYU professor Noriel Roubini (aka “Dr. Doom”)—the fall has confirmed suspicions that it’s all a scam rigged by developers who exploit gullible investors by telling them “hold on to dear life,” to their investments, or HODL.
It was only three weeks weeks ago that Kevin Davitt, a senior instructor at The Options Institute at Cboe, was noting how bitcoin futures appeared stable in light of stock market volatility. Bitcoin, the thinking went, was past its adolescent mood swings, and was ready to settle down and get serious. Once stabilized, cryptocurrencies could be trusted to become the digital cash their boosters have promised. World domination would soon follow.
Life comes at you fast in the crypto world, and investors who not long ago were waiting for the next surge in prices are now wondering if there is a bottom. This Thanksgiving, they’ll be grateful that at least the holiday weekend’s lower trading volume should pause the slide.