Bitcoin is the worst of all financial worlds right now

This illustration image dated December 21, 2017 shows an interrupted representation of the virtual currency Bitcoin, which is placed on a monitor that shows stock charts and binary codes. REUTERS / Dado Ruvic / Illustration

NEW YORK, May 19 (Reuters Breakingviews) – The bull case for Bitcoin is pretty straightforward. It is a means of payment that can be used anywhere in the world; its supply is limited, so it should retain its value when inflation picks up; and it cannot be manipulated, especially not by central bankers or governments. After a recent slump, the crypto asset is currently hitting zero out of three points.

Bitcoin’s value has fallen by almost 50% to below $ 40,000 in two weeks, dragging siblings with it like ether. The culprits include China, which on Tuesday banned financial firms from trading cryptocurrencies, and Tesla (TSLA.O) boss Elon Musk, who stepped down from an earlier plan to buy, hold and accept his electric cars in Bitcoin. The amount of bad news has pushed the shares of the Coinbase Global (COIN.O) crypto exchange below their April price of $ 250.

For die-hard proponents of cryptocurrency, volatility is the point as it shows that the value of the asset is determined by the users, not the central banks. Technology investor Cathie Wood of Ark Invest still believes Bitcoin could hit $ 500,000, she told Bloomberg on Wednesday. For most investors, however, such fluctuations are the hallmark of speculative exuberance. The $ 92 billion trading on Tuesday was more than ten times Apple’s sales (AAPL.O), even though the US company’s market capitalization of $ 2 trillion is roughly three times the value of all existing bitcoins.

Some of the barriers to Bitcoin’s success may be surmountable. Concerns about the environmental impact of mining, which requires phenomenal computing power, could ease as the use of renewable energy sources increases. If Bitcoin were to reach a critical mass so that Musk-style interventions would no longer have any effect, other large institutions could go to their knees. Huge US lender Wells Fargo (WFC.N) plans to offer cryptocurrency investment options to its wealthy customers.

Currently, crypto assets are still a long way from achieving real currency status. While there is no central bank to meddle in their value, Musk, China or Poster on Reddit can all too easily step into the vacuum without the central bank’s accountability. As for inflation, investors are more concerned about it than they have been in years, but Bitcoin is headed in exactly the wrong direction. In conclusion, Bitcoin is best thought of as an option for something that could one day be a currency. And a pretty expensive one at that.

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Bitcoin plunged below $ 40,000 on May 19, bringing its two-week losses to nearly 50%. The day before, three Chinese financial sector trade organizations said banks and payment companies could not offer crypto-related services for fear of “disrupting normal economic and financial order.”

The cryptocurrency had approached $ 65,000 at its all-time high in April, compared to less than $ 4,000 in March. Other crypto assets like Ether and Dogecoin, a digital currency created as a parody of Bitcoin, also fell sharply on May 19th.

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