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The 2017-2018 cryptocurrency craze spawned its share of hopeful investors, die-hard advocates and critical detractors. For most, however, their role in this continuing saga was relegated to that of casual observer. But even the most casual of observer had to be amazed at the fortunes made and lost, the controversies and the legacy of the digital currency’s whirlwind year of 2018.

Bitcoin was the world’s first digital currency. Upon its inception in 2008, the price of a single Bitcoin was less than 10 cents. In the following years, Bitcoin’s value fluctuated but steadily rose. Then 2017 sparked a buying frenzy, as Bitcoin and other digital currencies were hyped as the next generation of global currency and means of transacting commerce. Demand for cryptocurrencies — and their prices — soared. Bitcoin rose from $1,000 on Jan. 1, 2017 to an all-time high of nearly $20,000 on Dec. 17, a staggering 1,900 percent increase.

Then the bubble burst. Less than two months later, on Feb. 6, Bitcoin’s price had cratered to just $6,050.

For most of 2018, Bitcoin’s price hovered just above the $6,000 mark, which became a significant support level. It staged a number of short-term rallies but failed to gain any significant momentum. Despite all the sell-offs and volatility, only a couple of times did Bitcoin’s price dip below this $6,000 “floor”. And each time, it immediately bounced back.

But that key support level was decimated on Nov. 14, as the price of Bitcoin fell to $5,500. By Dec. 15, it had fallen to just $3,200. Currently, Bitcoin is trading around $3,800 — a fraction of its near-$20,000 record high. Other cryptocurrencies suffered similar fates.

The challenges for Bitcoin and other cryptocurrencies stem from their very creation. They are decentralized forms of digital — currency no single nation owns them or provides a governing regulatory oversight.

To this day, the industry remains largely unregulated, though on March 7 the Securities and Exchange Commission expanded its authority over cryptocurrencies under the umbrella of federal securities laws. But most of the current 2,076 forms of digital currency — and the more than 200 exchanges that serve as digital platforms to buy and sell cryptocurrencies — are overseas. Good luck having your customer complaint handled in such nations as Tanzania, the Republic of Seychelles or Estonia.

Claims of fraud, corruption and price manipulation remain rampant. There are still no common industry standards for cybersecurity. The industry continues to be besieged by theft from computer hackers. In 2018, more than $1 billion of digital currency was estimated to have been stolen by hackers. Of this, $530 was from the Jan. 26 theft of Japan-based exchange Coincheck, which remains the largest hack ever in cryptocurrency history.

Where the cryptocurrency industry eventually lands this year is anyone’s guess. The industry continues to face significant headwinds, both as a legitimate form of currency and as an investment asset. The hype surrounding Bitcoin and other digital currencies has definitely faded — the industry’s free-pass has been revoked. Going forward, any gains this beleaguered industry makes will have to be earned.

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Mark Grywacheski spent more than 14 years as a professional trader in Chicago, where he served on various committees for multiple global financial exchanges and as an industry Arbitrator for more than a decade. He is an expert in financial markets and economic analysis and is an investment advisor with Quad-Cities Investment Group, Davenport.

Disclaimer: Opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. Quad-Cities Investment Group LLC is a registered investment advisor with the U.S. Securities Exchange Commission.

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