In December 2017, the price of bitcoin was approaching $20,000 after months of miraculous growth had pushed its price up by more than 2,000 per cent since the start of year. There seemed no end in sight to the cryptocurrency being hailed as the future of money, as newly-minted early adopters encouraged newcomers to invest in the digital gold rush.

But twelve months later the Christmas miracle has transformed into a bleak midwinter for bitcoin. A series of swift price crashes in late December and early January, followed by months of steady decline, has left bitcoin trading at just $3,450 – its lowest value since August 2017. The question investors are now asking is how much further bitcoin can fall?

Recent forecasts from market analysts predict more losses, at least in the near future, with some pointing to bitcoin's previous price patterns. Since its inception in 2009, bitcoin has experienced five major corrections with an average drop in value of 85 per cent. In order to realise this same percentage drop, bitcoin would need to fall to below $3,000.

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While this seems entirely possible given the direction bitcoin is currently heading, what is less certain is where bitcoin goes from there. One acclaimed financial analyst is therefore calling this a "crunch time" for cryptocurrencies.

Arup Sen, a support lawyer at Taylor Wessing who worked for the Financial Conduct Authority for five years, tells The Independent that 2019 will be the making or breaking of bitcoin, other cryptocurrencies and its underlying blockchain technology.

left Created with Sketch. right Created with Sketch. Shape Created with Sketch. Bitcoin's volatile history in pictures 1/8 Satoshi Nakamoto creates the first bitcoin block in 2009 On 3 January, 2009, the genesis block of bitcoin appeared. It came less than a year after the pseudonymous creator Satoshi Nakamoto detailed the cryptocurrency in a paper titled 'Bitcoin: A peer-to-Peer Electronic Cash System' Reuters 2/8 Bitcoin is used as a currency for the first time On 22 May, 2010, the first ever real-world bitcoin transaction took place. Lazlo Hanyecz bought two pizzas for 10,000 bitcoins – the equivalent of $90 million at today's prices Lazlo Hanyecz 3/8 Silk Road opens for business Bitcoin soon gained notoriety for its use on the dark web. The Silk Road marketplace, established in 2011, was the first of hundreds of sites to offer illegal drugs and services in exchange for bitcoin 4/8 The first bitcoin ATM appears On 29 October, 2013, the first ever bitcoin ATM was installed in a coffee shop in Vancouver, Canada. The machine allowed people to exchange bitcoins for cash REUTERS/Dimitris Michalakis 5/8 The fall of MtGox The world's biggest bitcoin exchange, MtGox, filed for bankruptcy in February 2014 after losing almost 750,000 of its customers bitcoins. At the time, this was around 7 per cent of all bitcoins and the market inevitably crashed Getty Images 6/8 Would the real Satoshi Nakamoto please stand up In 2015, Australian police raided the home of Craig Wright after the entrepreneur claimed he was Satoshi Nakamoto. He later rescinded the claim Getty Images 7/8 Bitcoin's big split On 1 August, 2017, an unresolvable dispute within the bitcoin community saw the network split. The fork of bitcoin's underlying blockchain technology spawned a new cryptocurrency: Bitcoin cash REUTERS 8/8 Bitcoin's price sky rockets Towards the end of 2017, the price of bitcoin surged to almost $20,000. This represented a 1,300 per cent increase from its price at the start of the year Reuters 1/8 Satoshi Nakamoto creates the first bitcoin block in 2009 On 3 January, 2009, the genesis block of bitcoin appeared. It came less than a year after the pseudonymous creator Satoshi Nakamoto detailed the cryptocurrency in a paper titled 'Bitcoin: A peer-to-Peer Electronic Cash System' Reuters 2/8 Bitcoin is used as a currency for the first time On 22 May, 2010, the first ever real-world bitcoin transaction took place. Lazlo Hanyecz bought two pizzas for 10,000 bitcoins – the equivalent of $90 million at today's prices Lazlo Hanyecz 3/8 Silk Road opens for business Bitcoin soon gained notoriety for its use on the dark web. The Silk Road marketplace, established in 2011, was the first of hundreds of sites to offer illegal drugs and services in exchange for bitcoin 4/8 The first bitcoin ATM appears On 29 October, 2013, the first ever bitcoin ATM was installed in a coffee shop in Vancouver, Canada. The machine allowed people to exchange bitcoins for cash REUTERS/Dimitris Michalakis 5/8 The fall of MtGox The world's biggest bitcoin exchange, MtGox, filed for bankruptcy in February 2014 after losing almost 750,000 of its customers bitcoins. At the time, this was around 7 per cent of all bitcoins and the market inevitably crashed Getty Images 6/8 Would the real Satoshi Nakamoto please stand up In 2015, Australian police raided the home of Craig Wright after the entrepreneur claimed he was Satoshi Nakamoto. He later rescinded the claim Getty Images 7/8 Bitcoin's big split On 1 August, 2017, an unresolvable dispute within the bitcoin community saw the network split. The fork of bitcoin's underlying blockchain technology spawned a new cryptocurrency: Bitcoin cash REUTERS 8/8 Bitcoin's price sky rockets Towards the end of 2017, the price of bitcoin surged to almost $20,000. This represented a 1,300 per cent increase from its price at the start of the year Reuters

"After first grabbing the headlines back in 2011 with the advent of bitcoin, blockchain and cryptoassets have progressed significantly, with over 1,500 cryptocurrencies now vying for attention alongside various other cryptoasset types," Sen says.

"But as the market and technology have grown, so has the volume of criticism and the strength of opposition. Payment specialists decry the slow processing times and high transaction costs associated with cryptocurrencies, law enforcement looks at initial coin offerings [fundraising through cryptocurrencies] as another way of scamming the public. And now the regulators are circling."

All of this points to an uncertain future for bitcoin, with some suggesting its technical deficiencies could see one of its rivals like ethereum or bitcoin cash overtake it as the world's most valuable cryptocurrency.

Bitcoin has hit its lowest value since August 2017 (CoinMarketCap)

Many bitcoin advocates believe the amount of high-profile investors, a market cap that is still above $60 billion, and an entire industry trailing in its wake means bitcoin is simply too big to fail.

"Many billionaire investors in traditional financial markets remain optimistic about the long-term upward trend in crypto despite the near 85 per cent decline in valuation across the board," says David Thomas, director of the Mayfair-based cryptocurrency broker GlobalBlock.

"The simple fact is that these high-profile investors can manage losses that arise from these movements in high-risk emerging assets as they are only a proportionately small part of their overall portfolios, and they believe in the value that will be created in the long term."

Looking back on previous price collapses, Thomas notes that bitcoin has taken 67 weeks on average to recover and then go on to a new all-time high. By this measure, bitcoin will be once again reaching towards $20,000 in the second quarter of 2019.

Whether or not bitcoin recovers and continues its dominance over other cryptocurrencies will depend on whether another contender can challenge its reign by either offering greater functionality or more widespread consumer adoption.

But regardless of bitcoin's future prospects as a mainstream currency, industry experts have pointed to perhaps its greatest achievement as a technology.

“There has been a lot of hype around bitcoin and blockchain technologies, but in the background a new economic infrastructure is forming," Kristjan Kangro, founder and CEO of Estonian blockchain firm Change, tells The Independent. "Tokenisation of assets, for example, is already changing how people invest, spend and raise capital around the world.

"As such, it doesn’t matter what the price of bitcoin is, what matters is how blockchain restructures our societies and economies. We are seeing this restructuring happening today and productivity will follow. In short, even if bitcoin becomes obsolete, the underlying blockchain technology that has spawned an entire industry will still live on.”

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How low will bitcoin go? 'Crunch time' for cryptocurrency as analysts predict 2019 price

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