London - There are 1 036 virtual currencies out there, from Bitcoin to - no joke - BigBoobsCoin. The price of almost every single one was down on Friday morning.
Bitcoin, the one that kicked off the whole shebang with its rigid algorithm to cap supply, hit its lowest point in two weeks before climbing back to about $14 000.
Is this the epic bursting of the bubble the bears have been waiting for? Not yet. The selloff certainly looks like a reversal of the herd buy-in that hit fever pitch this year. But, in absolute price terms, cryptocurrencies are only looking very marginally less insane.
Even after sinking 35% from a record high, Bitcoin is still 1 200% higher than where it was at the end of 2016. And corrections are common in this market. Bitcoin dropped 13% in one day just three months ago, and 22% in one day back in 2015.
What's troubling for the true crypto-believers is that arguments about the fundamental differences between each digital token's merits are getting lost in the overwhelming crush to get rich or get out. Bitcoin's 24-hour drop of 18% was matched or exceeded by other Top-5 cryptocurrencies: Ethereum, Bitcoin Cash and Litecoin.
Remember that some of these claim to be new and improved versions of the original Bitcoin, which is showing its age as its strict rules create congestion in the system and push transaction fees past $40.
The price swing is also mighty troubling for all those eager minnows that have recently dived in, coming at the same time as the Bitcoin aristocracy - the whales - are cutting back. Gadfly has noted that the wealthiest top tier of Bitcoin holdings has thinned since January, while small holders of fractions of Bitcoin have swelled.
And even those lucky enough to be sitting on life-changing gains and thinking of selling, or just rotating to other crypto-tokens, face the constant risk of the whole market taking fright. Despite the interest from Goldman Sachs, this is not a sophisticated market.
Speaking of Wall Street, we're unlikely to see any let up in the pressure to trade Bitcoin and its ilk just yet. With futures contracts launched, applications for exchange-traded funds piling up, and endless evidence that cryptocurrencies offer lots of money-spinning volatility, talk of a Goldman Sachs trading desk is unsurprising.
But if Main Street gets more price-drop frights like this, maybe it will force more people to think before taking the plunge. Anything that lessens the chance of regulators having serious and systemic losses to mop up can only be a good thing.
- Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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