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Once considered inflation-proof, crypto is stumbling

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A person stands in front of a large gold bitcoin token.

Crypto's crash is unlikely to steer big investors away. Anthony Kwan/Getty Images

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It’s not just the stock market that’s taken a beating this year. Cryptocurrencies are also stumbling. Bitcoin is down over 30% from the start of the year, and down 50% from its peak last November. Ethereum and dogecoin and bunch of other coins are also way down in value.

Bitcoin was supposed to be a hedge against inflation — a new currency not tied to a central bank’s printing press. Turns out … nah. At least not yet. 

“This stuff is high-growth technology. It is not an inflation hedge,” said Leigh Drogen, head of Starkiller Capital. 

Crypto is behaving like high risk tech stocks, so when those take a punch, down goes bitcoin. Plus, last year an army of novice investors plowed cash into crypto. And now, “the casino isn’t as interesting today as it was then,” Drogen said.

But it’s unlikely this crash will deter venture capital investment in the broader crypto economy, said Campbell Harvey at Duke University. He points to 2018, when bitcoin lost over half its value. 

“And what happened in the venture capital space? There was no negative effect whatsoever,” he said.

So expect more Silicon Valley money pouring into cryptoland. 

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