Bitcoin prices took a nosedive this weekend falling a whopping 17.2 percent, in just 72 hours, from 311.05 on Friday to $257.61 on Sunday. That completes a rocky year of ups and downs for bitcoin, but mostly downs, with the leading crypto-currency falling 72.8 percent in the past year from January 5, 2014 to January 4, 2015.
This makes bitcoin one of the poorest performing currencies, and one of the worst investments, of 2014.
According to Bloomberg Finance the worst performing fiat currency of 2014 was the Russian Ruble which declined by 55%. Bitcoin declined 59.81 percent from January 1, 2014 to December 31, 2014 thereby “beating” the Ruble to worst performing currency by more than nose. It did worse according to Bloomberg’s figures than Ukraine Hryvnia and the Argentina Peso. Based on PYMNTS.com’s volatility index Bitcoin was also 48.1 percent more volatile than the Ruble, 35.3 percent more volatile than the Hryvnia, and 180.5 percent more volatile than the Peso. As an investment Bitcoin did even worse than oil which according to Bloomberg plunged 41.4 percent over the year.
PYMNTS.com reached out to Dr. David S. Evans, Chairman of Global Economics Group, for his perspective:
PYMNTS: You’ve said all along that bitcoin prices reflect a bubble. Do you believe the bubble has burst?
Evans: “Probably not. It is hard to know where the value of bitcoin will settle but my impression is that there is still a lot of irrational exuberance out there with a lot of rationalizations about the price falling and lots of speculation that it will rise again. So it wouldn’t surprise me if bitcoin prices ran up again. It will take a much more massive fall to convince me that the bubble is over.”
PYMNTS: What does this mean for bitcoin as a currency?
Evans: “It kills any chance that bitcoin could be a mainstream currency. No one wants to hold a currency that has that great a risk of depreciating in value. Most people who put money in bitcoin wallets in 2014 and didn’t spend it instantly took a hit. It is dead, let me repeat, dead, as a mainstream currency.”
PYMNTS: What does this mean for entrepreneurs and investors who have banked on bitcoin not as a currency but as a technology?
Evans: “These significant price declines should be a real source of concern for them. Unfortunately it isn’t possible to bet on the blockchain as a technology without also betting on the ability of the bitcoin organization, which consists most importantly of the so-called miners who do the processing work, to prosper. Miners who invested in equipment thinking that the price was going to stay high have taken a massive beating. Just like the gold rush, a lot of the energy around getting into bitcoin was driven by the expectations of significant returns as the currency appreciates.”
PYMNTS: So you aren’t bullish on bitcoin as a technology?
Evans: “Not so long as it has all the bitcoin baggage which includes the foundation and an unsustainable approach for compensating and regulating the decentralized processing system. Nope – and who would be?”
You can read all of Evans’s various pieces on bitcoin here. He’s been a skeptic from the start, and a much criticized one for his opinion on bitcoin. You can also track the ups and downs of bitcoin here – the PYMNTS Bitcoin Tracker is the week by week look at the developments in bitcoin. Our latest piece, “Was 2014 Bitcoin’s Death March” summarizes the various developments in the year that , well, wasn’t such a great one for bitcoin.