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As Value of Cryptocurrencies Falls, a Lot of New and Risk-Taking Investors Are Suffering Immensely (nytimes.com)
After the latest round of big price drops, many cryptocurrencies have given back all of the enormous gains they experienced last winter. The value of all outstanding digital tokens has fallen by about $600 billion, or 75 percent, since the peak in January, according to data from the website coinmarketcap.com. The New York Times: The virtual currency markets have been through booms and busts before -- and recovered to boom again. But this bust could have a more lasting impact on the technology's adoption because of the sheer number of ordinary people who invested in digital tokens over the last year, and who are likely to associate cryptocurrencies with financial ruin for a very long time. [...] By many metrics, more people put money into virtual currencies last fall and winter than in all of the preceding nine or so years. Coinbase, the largest cryptocurrency brokerage in the United States, doubled its number of customers between October and March. The start-up Square began allowing the users of its mobile app, Square Cash, to buy Bitcoin last November.
[...] Kim Hyon-jeong, a 45-year-old teacher and mother of one who lives on the outskirts of Seoul, said she put about 100 million won, or $90,000, into cryptocurrencies last fall. She drew on savings, an insurance policy and a $25,000 loan. Her investments are now down about 90 percent. "I thought that cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us," she said. "I thought my family and I could escape hardship and live more comfortably, but it turned out to be the other way around."
[...] In the United States, Charles Herman, a 29-year-old small-business owner in Charleston, S.C., became obsessed with virtual currencies in September. He said he now felt that he had wasted 10 months of his life trying to play the markets. While he is essentially back to the $4,000 he put in, he has soured on the revolutionary promises that virtual currency fanatics made for the technology last year and has resumed investing his money in real estate. "I guess I thought we were 'sticking it to the man' when I got on board," Mr. Herman said. "But I think 'the man' had already caught on, and had an exit strategy."
[...] Kim Hyon-jeong, a 45-year-old teacher and mother of one who lives on the outskirts of Seoul, said she put about 100 million won, or $90,000, into cryptocurrencies last fall. She drew on savings, an insurance policy and a $25,000 loan. Her investments are now down about 90 percent. "I thought that cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us," she said. "I thought my family and I could escape hardship and live more comfortably, but it turned out to be the other way around."
[...] In the United States, Charles Herman, a 29-year-old small-business owner in Charleston, S.C., became obsessed with virtual currencies in September. He said he now felt that he had wasted 10 months of his life trying to play the markets. While he is essentially back to the $4,000 he put in, he has soured on the revolutionary promises that virtual currency fanatics made for the technology last year and has resumed investing his money in real estate. "I guess I thought we were 'sticking it to the man' when I got on board," Mr. Herman said. "But I think 'the man' had already caught on, and had an exit strategy."
Those two anecdotes are stories of people hoping to magically get rich quick. The outcome is unsurprising.
Surprising Exactly Nobody...
Well, OK, surprising the poor suckers who bought into this high-tech reinvention of the classic pump-and-dump I guess, but no-one else.
Have you heard about investing in tulip bulbs?
"National Security is the chief cause of national insecurity." - Celine's First Law
Whether stock market or a casino, gambling is taking high risks so nobody should be surprised if they lose their shirt. If you buy into something that returns significantly more than what you can borrow money at, of course it's high risk (or else the bank lending you money would buy those same investments instead of lending you money).
I kinda hate jumping onto the bandwagon, but investing in anything on the basis of "someone dumber than me will buy it for more than I paid" always leads to the greatest number of people learning the hard way that they're the dumber someones.
Tuition can be wickedly expensive in the school of hard knocks.
Warning: This signature may offend some viewers.
It's not all bad.
All these crypto-miners have fostered better GPUs, and have driven demand for more generating capacity in the power grid. And now that it's over, the rest of us can use these for useful purposes.
So thank you, early adopters. Sorry that the inevitable happened to your wasted energy.
"Nine times out of ten, starting a fire is not the best way to solve the problem." - my wife
"I thought that cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us,"
And yet you were throwing debt at what was essentially a "get rich quick" scheme? That's not ordinary nor hardworking, that's just idiocy.
How does the currently bearish press resemble (or not) that after the previous Bitcoin bubble, or the one before that? Also, to those who enjoy citing tulip mania, how many bubbles did tulip mania go through before it crashed, and what as the approximate peak market cap of each bubble?
Transaction times and transaction fees are awful and not at all competitive with credit (let alone cash), and there is no clear way to address either problem. In fact, it looks like both problems will only get worse as bitcoin becomes more popular. Until both problems are solved, bitcoin is worthless as a currency because it can't be used like other currencies can.
in the last 47 years of my life. It always comes down to this. once the mass media hype starts and ordinary people are dragged into the next financial get rich quick scheme in the masses, it is better to get out if you are into something.
The pattern is usually that you get lots of press reports, that you should invest, that this thing is a totally new economy which works differently, that you are stupid if you do not invest. Once those reports crawl up, you can expect a crash between the next three months and a year.
I have seen this with the dot bomb bust, with the housing bubble etc... and the patterns 1929 were exactly the same, when Kennedy went out of the stock market 1928 because he got stock advices from people working on the street.
Also the bomb cycle always is the same, it starts to go down, the financial press and others are screaming hold... then it recovers slightly everyone is yelling it just was a hickup and then it goes down again everyone screams you have to hold and then over and over again with a few upwards pumps along the road. The people screaming hold, usually are the ones connected to the big investors selling big time to get out while everyone thinks they can recover.
Well, more reasonable prices anyway. I built my first PC from scratch last year, rather assembled. When I shopped for graphics cards I could not find what I wanted at a decent price thanks to the cryptocurrency miners. I ended up after much searching online buying a decent next lower tier graphics card at a good price. The card wasn't what I wanted but good enough.
At the rate the miners were going they were actually putting out as much carbon dioxide as a small country, not good. Let's hope for our sakes that crypto currencies won't created another bubble for our wallet's sake and our environment's.
"You'll get nothing, and you'll like it!"
Whenever taxi drivers start giving you investment tips, it's a bubble.
Coincidentally that was when Wall Street approved and began Bitcoin futures trading.
ooooh, is this one of those facebooky "please ask me about what I'm referring to"?
I owned a considerable amount of bitcoins which I had mined a few years before. When the price jumped to $19 000 in December 2017, I judged that this speculative madness couldn't continue any longer and decided to turn my BTC into cash. Turns out I was right.
Unless you're shorting, the maximum you can lose is your initial investment. Which makes investing a dirt-simple risk proposition, since you automatically know before you invest your money exactly what's the maximum you could lose (all of it). So the amount these people have lost and are suffering is precisely measurable, and was precisely measurable before they ever invested.
If you borrow money to invest (loans or leveraging), or short stocks (where the maximum gain is the value of the stock, while the maximum loss is potentially infinite - the inverse of buying stock) without understanding the risks involved, it's your own fault.
I've bailed out friends and family members with loans - basically invested in them. But it's never affected me financially if they don't pay me back because I made each loan assuming they wouldn't pay me back and I would take a 100% loss. If they do end up paying me back, that's a bonus.
People joining pyramid game late are taking heavy losses while those at the top cash out.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
What really scared me was the number of people that were throwing big money in at the top. Some of these people were very smart people and they basically dropped $30-50k.
They don't talk about Bitcoin so much anymore, and I don't ask.
The Greater Fool has been in practice long before the stock market and has been part of the stock market from its very beginning. It's your idiotic "it's the government's fault" thinking that leads to so many making the most basic investment mistakes like the two noted (all eggs in one basket).
Just to set the record straight, taxes in the US are geared toward long term investing and savings for retirement. It would be nice if it was also geared toward saving for higher education & primary residence ownership, but those parts have been all messed up for a while thanks to both parties.
No. People selling at 20k is smart. Greed is people buying at 20k.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Risk-Taking Investors take risks. News at 11.
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Actually, short term capital gains and unqualified dividends are taxed at ordinary income rates. Long term capital gains (stocks held longer than 1 year) and qualified dividends (stocks held for more than 60 days in a 121 day window around the dividend distribution) are taxed at preferential rates, as low as 0% depending on your income bracket but at 15% for a good portion of the population.
https://finance.yahoo.com/news...