Is crypto back?

This time it was surely all over. As inflation started to rise towards a 40-year high, as central banks started raising interest rates for the first time in more than a decade, and as the monetary printing presses finally stopped running, the crypto-currencies crashed.

What a crash it was. Bitcoin, the best-known crypto, fell all the way from $61,000 last November to less than $19,000 in June, a spectacular drop of more than two thirds. Ethereum, Solana and other, frailer ‘coins’ – as well as the even flimsier digital collectors’ items known as NFTs – all tanked. This appeared finally to confirm what the doubters had said all along. Cryptocurrencies were nothing more than the latest in a long line of speculative manias: a 21st-century version of the Dutch Tulip Bubble of the 1630s. It was bound to pop sooner or later, and it had.

Hold on, though. In fact, something more interesting is happening. The cryptos may have collapsed, but now they are steadily coming back. Since the middle of June, Bitcoin has clawed its way to almost $25,000. Ethereum has doubled in value during the last month, rising from slightly over $900 to $1,800. Solana has gone from $30 to $45. The list goes on.

None of the cryptocurrencies has yet got close to recovering their peaks, and this may turn into what the traders call a ‘dead-cat bounce’. But the events of the past few weeks have perhaps started to look like a durable recovery, one that should run for several months.

This is what makes cryptocurrency different from typical investment mania. After the crash of the frenzied tulip market, the bulbs never came back (except of course in gardens). After the popping of the South Sea Bubble in 1720, the South Sea Company staggered on until 1853 but it never reached its former heights.