Bitcoin and cryptocurrency plunge 80% in value – making it worse than the burst of the Dot-Com bubble in the early days of the internet

• The findings come from the MVIS CryptoCompare Digital Assets 10 Index
• The Frankfurt firm says digital money has dropped in value by 80% since January
• Their decline is now steeper the Dot-Com bubble which burst in the year 2000
• The losses were led by Ether, the second-largest virtual currency after Bitcoin

Cryptocurrencies were once seen as a hot commodity in financial trading but it seems the bubble has now burst, according to industry analysts.

The value of Bitcoin and other forms of digital currency has plunged by 80 per cent since January – a total loss of $640 billion that has sparked comparisons with the Dot-Com bubble in the early days of the internet.

From 1997 to 2001, a large number of online-based companies – commonly referred to as Dot-Coms – were founded, prompting a flurry of investment.

However, the value of many of these companies started to plummet around the turn of the new millennium.

Some, like eBay and Amazon.com, were able to recover and surpass their stock price peaks during the bubble, but hundreds more were not as fortunate.

The steady decline in cryptocurrencies has been triggered by the wariness of institutional investors, banks and regulators.

An increasing number of startups that raised money through an ICO (Initial Coin Offering) are now selling their coins for money backed by governments, creating pressure to sell.

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 Cryptocurrencies have been a hot commodity in financial trading but it seems the bubble has now burst, industry analysts have warned. Bitcoin and other forms of digital money have plunged by 80 per cent since January (stock image)

The latest valuation comes from the MVIS CryptoCompare Digital Assets 10 Index, based in Frankfurt, which has tracked the collapse of digital currencies from an all-time high in January to a recent 80 per cent drop in value.

The decline of these digital coins is now steeper than the Nasdaq Composite Index’s 78 per cent peak-to-trough monitoring after the Dot-Com bubble burst in 2000.

'It just shows what a massive, speculative bubble the whole crypto thing was – as many of us at the time warned,' Neil Wilson, chief market analyst in London for Markets.com, a foreign-exchange trading platform, told Bloomberg.

'It's a very likely a winner takes all market – Bitcoin currently most likely' 

The findings come from the MVIS CryptoCompare Digital Assets 10 Index, based in Frankfurt, which has tracked the collapse of digital currencies from a January high to an 80 per cent drop in value

Even Bitcoin, the standard bearer for digital money, has seen a 70 per cent fall from its record high of almost £15,000 ($20,000). In late June, the price of Bitcoin fell below the $6,000 mark for the first time since early November last year, and has barely recovered

WHAT WAS THE DOTCOM BUBBLE? 

From 1997 to 2001, a large number of Internet based companies - commonly referred to as dot coms - were founded, but many of them also failed. 

Companies such as Pets.com and Webvan failed completely and shut down. 

Others, such as Cisco, whose stock declined by 86 per cent, lost a large portion of their market capitalisation but survived.

Some companies, like eBay and Amazon.com, were able to recover and surpass their stock price peaks during the bubble.

The losses were led by Ether, the second-largest virtual currency after Bitcoin.

Its value fell by six per cent to $171.15 (£131.10) at 7:50 am ET (12:50 pm BST) in New York yesterday, taking its total drop in value this month to 40 per cent.

Bitcoin remained relatively stable, while the MVIS CryptoCompare index fell 3.8 percent, Bloomberg reports.

The value of all virtual currencies tracked by CoinMarketCap.com sank to $187 billion (£143bn), a 10-month low according to the financial website.

The bubble burst comes after warnings by a number of financial experts who saw the impending crash coming.

Bank of England governor Mark Carney launched a scathing attack on cryptocurrencies in Marhc, saying 'fools' were pumping up their values.

He warned that the 'currencies' showed the 'classic hallmarks of bubbles' as he called for them held to the 'same standards as the rest of the financial system'.

The crash has drawn comparisons to the Dot-Com bubble burst in the early days of the internet. This image shows banks of computer processors set up to 'mine' the Bitcoin cryptocturrency

Warren Buffett, one of the most influential and successful businessmen of his generation, has regularly warned about an imminent cryptocurrency bubble burst.

Back in May, Buffett revealed to CNBC that bitcoin was 'probably rat poison squared.'

The main issue Buffett has with Bitcoin is the fact that it has no intrinsic value.

'If you buy something like bitcoin or some cryptocurrency, you don't have anything that is producing anything,' Buffett said in an interview with Yahoo Finance.

'You're just hoping the next guy pays more. And you only feel you'll find the next guy to pay more if he thinks he's going to find someone that's going to pay more.

'You aren't investing when you do that, you're speculating.'

Bitcoin saw its value go through the roof last year – beating the 17th Century dutch Tulip Mania, the South Sea bubble and the Dot-Com bubble of the early 2000s to become the biggest economic bubble in history.

At the height of the worldwide crypto-mania, it was worth in excess of $830 billion (£620 billion).

Investors have already been hit by the vagaries of the cryptocurrency market.

Sydney based journalist Derek Rose said he had been making half a million dollars every other day thanks to Bitcoin and other digital montey, until he lost $7million (£5million) when their value dipped before Christmas.

Suicide prevention messages were being shared among investors as the crytocurrencies plunged in value. 

The Sydney-based journalist admits the adrenaline rush of watching his portfolio rise rather than investing in real estate was what kept him investing. 

WHAT IS A BITCOIN? A LOOK AT THE DIGITAL CURRENCY

What is a Bitcoin?   

Bitcoin is what is referred to  as a 'crypto-currency.' 

It is the internet's version of money - a unique pieces of digital property that can be transferred from one person to another.

Bitcoins are generated by using an open-source computer program to solve complex math problems. This process is known as mining.  

Each Bitcoin has it's own unique fingerprint and is defined by a public address and a private key - or strings of numbers and letters that give each a specific identity.

They are also characterized by their position in a public database of all Bitcoin transactions known as the blockchain. 

The blockchain is maintained by a distributed network of computers around the world.

Because Bitcoins allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.

Where do Bitcoins come from?

People create Bitcoins through mining.

Mining is the process of solving complex math problems using computers running Bitcoin software.

These mining puzzles get increasingly harder as more Bitcoins enter circulation.

The rewards are cut in half at regular intervals due to a deliberate slowdown in the rate at which new Bitcoins enter circulation. 

Who's behind the currency?

Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto and then adopted by a small clutch of enthusiasts.

Nakamoto dropped off the map as Bitcoin began to attract widespread attention, but proponents say that doesn't matter: the currency obeys its own, internal logic.

Dr Craig Wright was suspected as the creator following a report by Wired last year and he has now confirmed his identity as the cryptocurrency's founder.  

What's a bitcoin worth?

Like any other currency, Bitcoins are only worth as much as you and your counterpart want them to be. 

Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration

In its early days, boosters swapped Bitcoins back and forth for minor favours or just as a game. 

One website even gave them away for free. 

As the market matured, the value of each Bitcoin grew.

Is the currency widely used?

That's debatable.

Businesses ranging from blogging platform Wordpress to retailer Overstock have jumped on the Bitcoin bandwagon amid a flurry of media coverage, but it's not clear whether the currency has really taken off. 

On the one hand, leading Bitcoin payment processor BitPay works with more than 20,000 businesses - roughly five times more than it did last year. 

On the other, the total number of Bitcoin transactions has stayed roughly constant at between 60,000 and 70,000 per day over the same period, according to Bitcoin wallet site blockchain.info.

Is Bitcoin particularly vulnerable to counterfeiting?

The Bitcoin network works by harnessing individuals' greed for the collective good. 

A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. 

The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional Bitcoin. 

As long as miners keep the blockchain secure, counterfeiting shouldn't be an issue.