By Brad Tuttle
January 31, 2018

After an absolutely phenomenal 2017, Bitcoin is getting off to a brutal start in 2018. The leading cryptocurrency skyrocketed in value last year, increasing from $800 to nearly $20,000, making many Bitcoin billionaires along the way.

It’s been quite a different story thus far in 2018, however: Bitcoin is on pace to fall 30% in January, its worst monthly decline in three years, according to the Wall Street Journal. And the value of Bitcoin has been cut roughly in half compared to its all-time high in late 2017.

According to the cryptocurrency-tracking site Coindesk, Bitcoin dropped as low as $9,628 over the past day, and each unit of Bitcoin was worth roughly $10,000 on Wednesday morning. That represents a decline of about 50% from the high set in late December 2017, when Bitcoin was well over $19,000.

If you bought a unit of Bitcoin just a month ago on January 1, 2018, when it cost $13,412, you’d now be in the hole $3,000 based on its value as of Tuesday ($10,035). If you invested $1,000 worth of Bitcoin on the same day, you’d be out more than $250.

The last time Bitcoin dropped 30% or more in a month was January 2015, when the cryptocurrency’s value decreased 32.5%.

A variety of factors seem to be causing the current Bitcoin crash, as well as the selloff of cryptocurrencies in general. The most obvious explanation is simply that Bitcoin is based on speculation—and all speculative bubbles burst. The moment may have come when a critical mass of Bitcoin investors sensed its value was on the downswing, causing fear and a snowball effect of selloffs.

Financial geniuses like the economist Robert Shiller and Berkshire Hathaway chairman and CEO Warren Buffett have warned of the dangers of Bitcoin and other cryptocurrencies because they’re fundamentally unsound investments: They’re subject to violent, rapid fluctuations in value—and it’s debatable if they genuinely have value at all.

As Shiller told CNBC earlier this month, Bitcoin “has no value at all unless there is some common consensus that it has value.” That’s why Shiller said Bitcoin “might totally collapse and be forgotten.”

Bitcoin speculators may also be having doubts about the cryptocurrency’s future because countries like China and South Korea have cracked down on cryptocurrency trading lately. In the U.S. this week, federal regulators stopped one bank’s plan to raise $1 billion in an “initial coin offering” amid concerns of fraud, and Facebook placed a ban on all cryptocurrency ads.

Bear in mind that even though Bitcoin has dropped roughly 50% over the past 50 days, its value is still much higher than it was compared to most of 2017. At this time one year ago, one unit of Bitcoin was worth about $1,000. At the beginning of October, Bitcoin was trading for around $4,500. So investors who purchased Bitcoin at any point during the first three-quarters of 2017 could still cash out now, with Bitcoin worth around $10,000, and make considerable profits.

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