It wasn't too long ago that the question about cryptocurrency prices was how high can they go? Now, it's just the reverse. Clearly, aren't the only thing cratering now.
Prices for bitcoin, by far the most popular digital money, have slumped more than 60 percent in the past month. Bitcoin peaked at $19,000 in December, but as of Monday afternoon, Coinbase showed it at around $6,740, the lowest since November. Rival tokens -- including ethereum, ripple and llitecoin -- also have tumbled by double-digit percentages in recent weeks.
The earlier dramatic surge in the value of cryptocurrencies caught many in the investing world by surprise, adding to the challenges of regulating the fast-moving market. But now, governments around the world are cracking down on digital money amid concerns about illegal manipulation, fraud and account security. And Facebook (FB) last week announced that it would quit accepting ads for cryptocurrencies and initial coin offerings (ICOs), which are used to bring new tokens to market in a process similar to how new stocks are launched through initial public offerings.
In the U.S., the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission are scheduled to testify Tuesday before the Senate Banking Committee about cryptocurrencies, which are subject to both commissions' jurisdiction. Investors are hoping that the hearing will provide some needed clarity to the.
Whether the selloff shows that cryptocurrencies were in a bubble that financial luminaries like Warren Buffett have been warning about for months is still hard to say.
"Bubbles are very hard to spot, even after the fact," wrote Shimon Kogan, a visiting associate professor at the Wharton School of The University of Pennsylvania, in a email. "Thus, there is a lot of controversy about their characteristics when looking at financial markets. There is, however, interesting academic evidence on the formation of bubbles in experiments. The general result is that bubbles form gradually but deflate very quickly."
Of course, cryptocurrencies continue to have legions of fans.
Tom Lee, co-founder and head of research at Fundstrat Global Advisors, recently told CNBC that he expects bitcoin to double and perhaps triple in 2018. Bulls have argued that bitcoin is taking market share from gold, noting that even with bitcoin's recent drop, it has gained more than 540 percent over the past year. The precious metal, however, is up only around 11 percent over the same time period.
Indeed, The Wall Street Journal noted that bitcoin has suffered five declines of more than 70 percent during its nine-year history, including two drops of more than 90 percent each, and it bounced back each time. Still, like everything else in the investing world, such past performance doesn't mean it will happen again.