This has been a brutal month for bitcoin enthusiasts. Since hitting an all-time high of US$124,752 on October 7, the original cryptocurrency has plunged 28 per cent and is on track for its worst month since June 2022, when a string of corporate collapses rocked the cryptocurrency industry.

The dramatic sell-off has helped wipe almost US$1.2 trillion off the market capitalisation of the cryptocurrency market, of which bitcoin accounts for 58 per cent. The speed and scale of the decline are matched only by the acuteness of the uncertainty regarding the precise cause of the sell-off.

In a report on November 24, Deutsche Bank provided as many as five plausible explanations. Three stem from bitcoin’s growing institutional acceptance in recent years, which has deepened the digital coin’s links with mainstream finance. “Since October, bitcoin has behaved more like a high-growth tech stock than an uncorrelated store of value,” Deutsche Bank said.

Bitcoin was never an effective hedge against sharp falls in conventional financial assets. Even so, its proponents have long championed its scarcity – bitcoin’s code guarantees the number of coins in existence can never surpass 21 million – as a reason to hold the token at a time when leading central banks are debasing the value of traditional currencies by printing money in perpetuity.

In fact, the early backers of bitcoin, many of them anti-government libertarians, saw decentralised, blockchain-based finance as a democratising force that would broaden financial access and reduce the concentration of economic power and ownership.

However, cryptocurrency’s promise of democratising finance rang hollow. The combination of minimal real-world applications, extreme price swings and the reputational damage stemming from digital currencies’ vulnerability to criminal activity undermined the confidence of even the most diehard fans.