Despite falling in value to its lowest point since December 2020, Bitcoin advocates claim the money alternative remains an effective way to protect one's wealth from government-caused money-printing and inflation.
"It remains a powerful tool for saving," said Dave Bradley, CRO of Bitcoin Well. "It is a very good way to hide from the exposure to massive government money printing and unsustainable spending that is destroying the purchasing power of anybody who's sitting on dollars."
The price of Bitcoin crashed from $40,000 two weeks ago, to just under $30,000. That brought all other cryptocurrencies tumbling with it, resulting in more than $200 billion being erased from the crypto market in a single day.
Bradley says investing in Bitcoin remains an effective tool for saving money in the long-term, but is less effective if an investor wants to store his wealth over a shorter timeframe.
"Bitcoin is a very risky, because as we can see, the price compared to dollars can change rapidly," Bradley said. "But if you're willing to wait, we've seen over the last 12 years that Bitcoin has been the absolute best way to store value over anything significant period of time. You're much safer in Bitcoin than you are in dollars."
Bradley said altcoins, which are cryptocurrencies other than Bitcoin, are "somewhere between a scam and a bad idea."
"They don't really have any reason to exist. I wouldn't recommend anyone invest any money into any cryptocurrencies that purport to offer something new and better than Bitcoin. Those two are very distinct categories."
Ryan Clements, a securities lawyer who now teaches at the University of Calgary and advises Canadian securities regulators, said the crypto sell-off was due to incoming interest rate increases and an overall bearish sentiment.
"Crypto assets are trading like risk assets right now, not like gold or inflation hedges, and are also trading in correlation with technology stocks. So the sell-off isn't surprising given the general market sentiment," he said.
Clements said the sell-off is also a result of the "catastrophic failure" of the altcoin Terra (LUNA), which fell from an all-time high of $115 down to less than one-tenth of one cent.
The crash began when the coin's algorithmic-based stablecoin TerraUSD, which pegs itself against the U.S. dollar, started plummeting. That led to a mass sell-off of Terra and over the course of a week.
According to Clements, stablecoins like Terra are based "purely on confidence and trust in the economic incentives of the stablecoin issuer's underlying ecosystem," meaning they are not actually stable.
"Once trust and investor demand evaporate, they quickly fail in a death spiral, and we saw this in real time over the last couple days with Luna."
Clements added that Bitcoin and other altcoins hasn't been widely used as a substitute for money because of their "high volatility."
Brad Mills, a self proclaimed "Bitcoin maximalist" and creator of the Magic Internet Money Podcast, said the crypto crash will have a short-term impact on the price of Bitcoin, but "the fundamentals of it hasn't changed."
"It's still a savings technology that's incredibly resilient to these types of historic market crashes. Bitcoin network hasn't missed a beat."
Mills said that while many people sold off their altcoins because they "started to realize that most of the garbage they're holding is worthless," a significant amount of Bitcoin holders have not sold. He pointed out that during the last bear market, 70% of Bitcoin holders held on to their coins.
"The only the only competition to Bitcoin is governments having sound monetary policy," Mills said. "And that's not going to happen."