(MENAFN- Gulf Times) The euphoria about bitcoin is gradually coming a full circle.
Amid warnings over value bubbles, ransomware hackers, security risks, dark links with weapons and illicit drugs, the value of the cryptocurrency market has plunged 53% this year to $280bn.
Now comes the withering caveat from the Bank for International Settlements, which serves as a central bank for other central banks.
Bitcoin and its ilk suffered from 'a range of shortcomings that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest and investment in the would-be asset class, according to the BIS.
Cryptocurrencies are too unstable, consume too much electricity, and are subject to too much manipulation and fraud to ever serve as bona fide mediums of exchange in the global economy, the BIS, the 88-year-old institution based in Basel, Switzerland, said.
A new area of excitement about bitcoin is blockchain the technology used for verifying and recording transactions that's at the heart of bitcoin. While blockchain does provide some benefits for the global financial system, the BIS warned in one of its most poignant findings that as the size of blockchain ledgers swell, it would eventually overwhelm everything from individual smartphones to servers, ultimately bringing the Internet to a halt.
Since reaching a record high in December shortly after the introduction of regulated futures contracts in the US, bitcoin wiped out more than half its value by February amid waves of negative news. Setbacks included escalating regulatory steps from authorities around the world including India, South Korea, China and the US; a record $500mn heist at a Japanese exchange, fears of price manipulation and Facebook's ban on cryptocurrency ads.
To be sure, the financial world is growing warier of the highly volatile digital currencies.
The Qatar Central Bank (QCB) in February issued circulars to financial institutions in the country warning of the risk of trading in bitcoin and other digital currencies, and asking them not to open any accounts for trading in cryptos.
Banks in Britain and the US have banned the use of credit cards to buy bitcoin and other cryptos fearing a plunge in their value will leave customers unable to repay their debts.
Some banks have stepped up scrutiny over its employees dealings with cryptocurrencies, including trading. Many banks have also stayed away from offering cryptocurrency trades for their clients,
More than eight years since the birth of bitcoin, central banks around the world are increasingly being compelled to address the potential upsides and downsides of digital currencies.
Bitcoin is the 'biggest bubble in human history, according to 'Dr Doom Nouriel Roubini. There are more than 1,300 cryptocurrencies and 'most of them are even worse than the largest digital token, he said.
Jamie Dimon, CEO of JPMorgan Chase & Co, has termed bitcoin as a 'fraud that's destined to unravel gradually.
Amid concerns over transparency, the crypto's boom-and-bust wild ride offers yet another historical lesson to a discerning investor: Any short-term windfall return that defies fundamental market wisdom is bound to end up in a crash.
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