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When the euphoria fades, prices tumble: Following significant losses in cryptocurrencies, the bottom may not yet have been reached. The risks of viewing Bitcoin and its counterparts as a store of value are currently being highlighted in a drastic way. – A commentary by Carsten Gerlinger, Managing Director and Head of Asset Management at Moventum AM.

The sharp losses in cryptocurrencies once again underline that Bitcoin and similar digital assets do not form a reliable asset class for solid wealth building. Bitcoin, the flagship cryptocurrency, has lost 15% of its value since the beginning of the year (in USD), while Ethereum, the second-largest cryptocurrency, has plummeted by more than 35%. Fear is spreading, and further steep declines are anticipated. The true nature of cryptocurrencies is becoming evident once again: they lack fundamental substance. Past price surges have largely been driven by overblown expectations.

After the steep rally following Trump’s election campaign, the momentum seems to have faded. More importantly, how is it possible that a sitting president actively participates in the crypto market with his own coins, influences the market with his statements, and profits from it? Who knows if Trump won’t suddenly change his stance and turn against the crypto world tomorrow – of course, excluding his own “currencies”. This alone demonstrates how quickly market sentiment can shift if expectations are not continuously fuelled. Whether the previous upward movement was even justified or how far prices might still fall is highly uncertain. Unlike stocks, which have fundamental data to support valuations, cryptocurrencies lack reliable metrics to assess price increases or losses in a meaningful way.

The recent largest-ever crypto theft – where more than 400,000 Ether, equivalent to around USD 1.5 billion, was stolen from the Bybit exchange in Dubai, allegedly by North Korean hackers – has once again highlighted a major issue within the crypto space: the security of investments remains a persistent weakness.

While cryptocurrencies have gained a reputation as a legitimate asset class within the financial world – reflected in the approval of crypto ETFs in the US and investments by major asset managers – the fundamental risks remain unchanged.

They still do not constitute an asset class that should be included in a diversified portfolio alongside stocks, bonds, and other investments. On the contrary, relying on Bitcoin and other cryptocurrencies for wealth accumulation remains speculative and dangerous. It is also not inconceivable that the crypto world could collapse even further, leading to a more dramatic crash than the bursting of the tech bubble at the turn of the millennium.