As Cryptocurrencies have crashed to earth, yet again, holders of the digital currencies are now facing a harsh reality. Often touted as “digital gold” that was a perfect hedge against inflation, cryptocurrencies have proven to be nothing more than vehicles for speculation.
The New York Times concludes, Bitcoin’s crash “starkly shows that its promise as a transformative asset remains unfulfilled.”
Bitcoin, the most widely tracked cryptocurrency, had lost nearly 60 percent of its value since hitting a peak in early November and dropped more than 25 percent from mid-April through mid-May.
“It delegitimizes the argument that Bitcoin is like gold,” Vetle Lunde, a digital asset analyst for Arcane Research told The Times. The firm’s analysis of Bitcoin this year shows it is closely tracking Nasdaq tech stocks, rather than gold.
In contrast, gold has maintained its value through 2022’s sea of volatility.
“There was this undeniable retail belief that Bitcoin at the end of last year was an inflation hedge — it was a safe haven, it was going to replace the dollar,” OANDA cryptocurrency analyst Ed Moya told The Times. “And what happened was inflation started to become very ugly, and Bitcoin lost half of its value.”
Other cryptocurrencies have also collapsed in price.
And even “stablecoins”—cryptocurrencies designed to maintain their value at $1 have lost their footing. Tether, the most widely traded “stablecoin” dropped below its $1 peg to 96 cents on May 12, while TerraUSD, the third-largest stablecoin, fell to 39 cents.