Crypto crash: market volatility is testing investor will but crypto-enthusiasts still see a future for the asset class

Bitcoin, the original cryptocurrency, remains a bellweather for the sector. It hit an all-time high of more than US$68,000 (£55,600) in November 2021, when the overall value of the cryptocurrency market was close to US$3 trillion. In the months since, however, most major cryptocurrencies have fallen by more 70% and bitcoin itself has dropped below US$18,000.

Is this just another crash in the volatile cryptocurrency market, or is this the beginning of the end for this alternative asset class?

When bitcoin was first introduced in early 2009, it was a new type of asset. While trading was thin initially, price appreciation drove its value to nearly US$20,000 in late 2017. This happened as more retail investors were drawn to cryptocurrencies as a supposed hedge or safe-haven versus other asset classes.

And as the market grew, so too did the range of investment opportunities. Futures and options – financial contracts to buy or sell an asset or security at a specific price or date – are a common hedging tool used in other markets such as oil or the stock market. In December 2017, the first bitcoin futures on a regulated exchange were listed by the Chicago Board Options Exchange. Bitcoin options followed on the Chicago Mercantile Exchange in January 2020. This period of expansion was topped by the launch of the first bitcoin exchange-traded fund (ETF) in October 2021, providing investors with exposure to bitcoin without having to buy it on a crypto exchange.