The cryptocurrency market has faced relentless downward pressure in recent months, with Bitcoin plunging nearly 70% from its all-time high of almost $20,000 in December 2017. As of late June 2025, Bitcoin’s price hovered around $6,100—the lowest level since November 2017—marking a dramatic reversal in sentiment and value. In the week ending June 25, over 80% of the nearly 1,600 tracked digital currencies declined, with an average drop of 19%. Bitcoin alone shed close to $500 in value that week, while Bitcoin Cash fell by $142.
This widespread correction comes amid growing scrutiny from regulators and sobering assessments from global financial institutions. The International Monetary Fund (IMF) and central banks have long expressed concerns about volatility and systemic risks, but the Bank for International Settlements (BIS)—often referred to as the "central bank of central banks"—has now delivered a comprehensive analysis of the promises and pitfalls of cryptocurrencies.
The Economic Limitations of Permissionless Cryptocurrencies
At the heart of BIS’s critique is a fundamental distinction between two types of distributed ledger technology (DLT): permissioned and permissionless systems.
Permissioned DLTs operate similarly to traditional financial infrastructures. Only trusted, authorized nodes—selected and supervised by a central entity—can update the ledger. While transaction records are stored differently than in conventional banking, trust still flows from a centralized authority.
In contrast, permissionless cryptocurrencies, like Bitcoin, aim to eliminate intermediaries entirely. Trust emerges not from institutions but from decentralized consensus among network participants. Anyone can join, but no single party holds the keys to alter the blockchain.
However, BIS argues that this model faces significant economic limitations. The system relies on fragile assumptions: that honest miners control most of the computational power, users verify full transaction histories, and monetary supply follows pre-coded rules.
The High Cost of Decentralized Trust
One of the most pressing issues is efficiency. Achieving trust without central oversight requires immense energy consumption. Bitcoin mining alone uses electricity comparable to an entire country like Switzerland. This environmental toll raises serious sustainability concerns.
Beyond energy, three core weaknesses undermine the viability of cryptocurrencies as mainstream payment tools:
- Scalability: Every user must download and validate all past transactions. As more transactions occur, the blockchain grows heavier, increasing verification time and hardware demands. Transaction throughput remains limited—leading to high fees during peak demand.
- Value Instability: Without a central issuer to stabilize supply or demand, prices swing wildly. The recent market-wide selloff—triggered partly by regulatory actions in Japan—illustrates how sentiment and external shocks can erase billions in value overnight.
- Fragile Trust Foundations: Despite claims of immutability, blockchains can fork due to software bugs or miner disagreements. A notable example occurred in March 2013 when a faulty update split the Bitcoin chain. Prices dropped nearly 33% before coordination restored order—but not before numerous transactions were reversed.
Such events expose a critical vulnerability: decentralized consensus can collapse unexpectedly, potentially erasing value instantly.
Distributed Ledger Technology Finds Purpose Beyond Crypto
While BIS remains skeptical about permissionless cryptocurrencies replacing fiat money, it acknowledges that DLT holds promise in targeted applications, particularly in cross-border payments.
Take the World Food Programme’s Building Blocks initiative. It uses a permissioned version of Ethereum to deliver food aid to Syrian refugees in Jordan. Although built on blockchain, the system uses sovereign currency as its unit of account and settlement mechanism—making it a “crypto-payment” system rather than a true cryptocurrency.
Originally centralized, the platform was later redesigned to run on a permissioned blockchain. The result? Transaction costs dropped by approximately 98% compared to traditional banking channels.
This case highlights a crucial insight: the real value of blockchain may lie not in replacing money, but in optimizing existing systems—especially where legacy infrastructure is inefficient or inaccessible.
Potential in Remittances and Financial Inclusion
For countries with large diasporas, remittance costs remain prohibitively high—often exceeding 5–10% of transfer value. Permissioned DLT-based payment systems could dramatically reduce these fees, enabling faster, cheaper, and more transparent international transfers.
Though other technologies are also being explored, BIS notes that it's still unclear which approach will prove most effective at scale. What is clear is that innovation in this space continues despite market downturns.
Market Volatility and Regulatory Pressures
Recent price drops have been exacerbated by regulatory developments. In June 2025, Japan’s Financial Services Agency issued business improvement orders to six major crypto exchanges—including bitFlyer and QUOINE—over compliance failures. Markets reacted swiftly, with Bitcoin briefly falling below $5,900—the first time since February it dipped under $6,000.
Compounding investor anxiety was news that Tokyo’s district court approved a civil rehabilitation plan for Mt. Gox, the now-defunct exchange that collapsed in 2014 after losing hundreds of thousands of Bitcoins to theft. While the ruling brings legal closure, it also revives painful memories for early adopters and weakens confidence in exchange security.
Market analysts suggest additional downward pressure may come from institutional investors. As one-year lock-up periods expire for many crypto hedge funds launched in early 2024, insiders predict some managers may offload holdings en masse—potentially triggering further declines.
Long-Term Outlook: Bubble or Breakthrough?
Goldman Sachs’ global research team has likened current cryptocurrencies to the dot-com bubble of the late 1990s. Just as many internet startups vanished after the crash, so too might most existing digital assets lose all value. Yet, just as robust companies like Amazon emerged stronger, foundational technologies like blockchain could eventually transform industries—from finance to supply chains to digital identity.
Experts agree that meaningful adoption will require time, technological refinement, and clearer regulatory frameworks.
Frequently Asked Questions (FAQ)
Q: Why did Bitcoin lose 70% of its value?
A: A combination of factors—including market saturation after the 2017 rally, increased regulatory scrutiny (especially in Asia), high volatility, and doubts about scalability—led to sustained selling pressure throughout 2025.
Q: Can cryptocurrencies ever replace traditional money?
A: Currently, no—due to volatility, scalability limits, and lack of intrinsic value backing. However, blockchain-based payment systems using stable units (like fiat-pegged tokens) show potential for specific use cases.
Q: Is blockchain technology still valuable if crypto fails?
A: Absolutely. Blockchain's ability to create tamper-proof records and streamline processes makes it useful in supply chain management, identity verification, voting systems, and more—even without speculative coins.
Q: What is the difference between permissioned and permissionless blockchains?
A: Permissionless blockchains (e.g., Bitcoin) allow anyone to participate and validate transactions. Permissioned versions restrict access to approved entities, offering greater control and efficiency but less decentralization.
Q: Are crypto hedge funds influencing prices?
A: Yes. As lock-up periods end for early funds, large-scale withdrawals or sales could increase selling pressure, especially during bear markets.
Q: Will small investors recover losses from the crypto crash?
A: Recovery depends on long-term adoption trends and macroeconomic conditions. Diversification and risk management remain essential for retail investors.
The collapse from peak prices serves as a reality check: while the dream of decentralized digital money captivated millions, real-world utility requires stability, efficiency, and trust beyond code alone.
As institutions like BIS continue to evaluate the technology dispassionately, one truth becomes clearer—the future isn't about replacing money with crypto, but about using smart design to make financial systems more inclusive, efficient, and resilient.