Bitcoin is in crisis. You can never really declare it dead - the idea of an electronic currency that is theoretically borderless and lawless will always live on somewhere - but its price has slumped 80 per cent in less than a year, wiping about $US700 billion ($969 billion) off cryptocurrency markets.

Cryptocurrencies have lost around 80 per cent of their value this year. Credit:Chris Ratcliffe

Where does it go from here? True believers are betting on a simple repeat of past asset bubbles, like dot-com stocks or real estate: a system-wide cleansing of bad actors before the roller-coaster ride begins anew. On that argument, there's a price for everything, even niche assets with no intrinsic value. Maybe Bitcoin should be above $US3700.

But the virtual currency's behaviour since the start of the year doesn't just look like a bubble bursting; it looks more like a currency under attack. Most of the price collapse happened between December and February, falling from almost $US19,000 to about $US7000. Until this month, the $US6000-to-$US7000 range seemed unbreakable. There was a floor in the price – until it caved.

It's reminiscent of how central banks in the past have defended their currencies in the face of heavy selling pressure, using their financial reserves to maintain a price level or range. Like a boxer taking a relentless series of punches, if there are no more resources to withstand the pain, it becomes a knockout. Think of the Russian central bank's fight to defend the ruble in 1998, or the Bank of England's effort to defend sterling in 1992. In both cases, the currencies held, then wobbled, then broke.