The bears are still in charge. After the headlong plunge of all risky assets on Monday there was a momentary pause for breath. But there was little sign of a return in confidence in the highest-risk end of the spectrum: cryptocurrencies.
A week ago, bitcoin was trading at more than $30,000. It is currently struggling to stay above $22,000, having lost more than half its value this year. Ethereum, the second-largest crypto, has done worse. It seems to have steadied around $1,200, which leaves it 68 per cent down on the year to date. The total market capitalisation of all cryptocurrencies is now below $1 trillion according to CoinMarketCap, back to the level of January 2021. At the peak last November, the market valued them at just under $3 trillion, so nearly $2 trillion of wealth has been destroyed in little more than six months.
This experience raises a string of questions. For some of those, we already know the answer. For example, are cryptocurrencies an effective hedge against inflation? No, absolutely not. The most traditional hedge of all, gold, has not been a perfect store of value. It was trading at $1,880 an ounce a year ago and was actually down to around $1,826 on Monday, the lowest for four weeks.