The sheer scale of the latest cryptocurrency meltdown has left the bulls and bears more divided than ever.
On the one hand, the Chinese government has warned investors that Bitcoin prices are “heading to zero.” True, Beijing may not be the most impartial or reliable of observers given its central bank has banned all crypto trades and is preparing to launch a digital currency of its own.
But the description of the cryptocurrency market as “full of manipulation and pseudo-technology concepts”, and Bitcoin as “nothing more than a string of digital codes”, by national news media agency Economic Daily will resonate with the harshest critics of the digital currency craze.
On the other hand, there are the most hardened of optimists who prefer to see the latest downturn, like all those that preceded it, as just another opportunity.
Likening the rout to the dot com crash of the early 2000s, Bank of England Deputy Governor Jon Cunliffe believes those that manage to ride out the crash could go on to become the technology giants of the future, eventually standing shoulder to shoulder with the existing Silicon Valley titans such as Amazon and eBay.
Perhaps. But that is hardly much reassurance to the tens of thousands of punters whose investments have become a sea of red.
The death of cryptocurrencies has been proclaimed numerous times before. Amusingly, one website has even been keeping a tally: it has counted 455 separate “obituaries”. This explains why the crypto-evangelists are dismissing the recent collapse of Bitcoin from a high of $69,000 to an 18-month low of just $20,000, as just another dip on a perennial rollercoaster ride for one of the world’s most volatile assets.
It is a journey that enthusiasts are fond of pointing out always results in the price eventually rebounding to a new high and therefore even greater profits for those brave enough, or more likely, wealthy enough to have “bought the dip”.
But this time, it really could be different. Why? Well, we are suddenly living in very different times. Like gold, crypto-currencies were sold as a reliable hedge against inflation, but the reality has proven to be very different with the market swept up in a much wider tech stock rout.
Perhaps more significantly, the scale of the plunge is unlike anything seen before - more than $2 trillion has been erased in just a few months and this time it isn’t just confined to individual investors or Bitcoin itself.
Tokens, coins, trading platforms, exchanges, lenders and companies set up to invest in crypto have all been dragged into the sell-off, compounding the ripple effect. The threat of contagion is growing.
The expansion of the crypto market has relied on pulling in an ever greater number of investors. It started with a clique of fanatical early adopters, sucked in growing numbers of armchair traders and some big institutions.
Last aboard the bandwagon came a flurry of desperate celebrities, many with shameless abandon and little-to-no knowledge or understanding of the products they are endorsing - thanks to an unforgivable lack of proper regulation.
Losses are therefore not just greater but more widespread this time around, and many investors, including some sizable Wall Street names, will struggle to bounce back.
It makes it hard to see how enough people can be persuaded to power another rally. The sheer quantum of those that get burnt may just be too great.
What’s more, the growing use of leverage in the market means there is a huge liquidity mismatch, which is greatly amplifying this round of losses. This has exposed the fatal frailties at the heart of the crypto infrastructure that increasingly underpins the entire system these days. Interdependence is a problem too with some trading platforms often having assets and deposits tied up in other corners of the crypto world.
Goldman Sachs has warned this incestuousness poses a growing systemic risk. And unlike in mainstream finance there is no regulator waiting on the sidelines with a bailout like there was during the banking crash, which means the risk of investor flight is much greater.
There will of course be those still sitting on a decent profit, but largely they will either be institutional investors or those who got in early. Anyone that was relatively late to the party will be nursing huge losses and won’t be in a position to hang around in the hope of the resulting bounce that die-hards have always been able to point to in the past.
Nor will those retail investors who piled in on the promise of easy riches. Many, having ignored the golden rule of never investing more than you can afford to lose, have sadly seen their life savings quickly go up in smoke.
One industry executive has talked of a two-year “crypto-winter”. There will be those that have amassed enough wealth to bounce back. Indeed, Do Kwon the South Korean entrepreneur whose $40bn (£32.6bn) Luna empire evaporated last month, has already found the immense audacity to attempt a comeback despite the threat of legal action from those who backed his last venture.
But with the cost of living crisis raging, few ordinary investors will have the luxury of hanging around for a revival that may not materialise.
As ever with any speculative bubble, the big winners will be the hedge funds that have placed massive bets on crypto’s collapse. The hope is that, with time, regulators catch up and eventually bring some stability to proceedings. For now, investors are on their own.