Crypto Crash Burns Speculators’ Dreams Of Cashing Out

The crypto landscape is littered with digital tokens, with promise and peril, with stories of booms … and, of course, more recently, busts. In fact, busts on a devastating scale.

To date as a group, the losses have mounted for all the cryptocurrencies out there – the ones that came to market and were snapped up and bought by speculators, and then sold. The New York Times offered a series of anecdotes yesterday that shows what happens when selling means that cryptocurrencies are down 75 percent from their peak (as they are now).

Statements from some of these Times sources include: “The losses have pretty much left me financially ruined.”   

There’s a sea change here, perhaps. The Times noted that there has been a widespread embrace of the tokens by “ordinary people” who invested and got hurt. Of course, some of those investors got in well before the downturn, and may still be holding onto gains. But many others are in the red.

As the Times stated, many more investors crowded into the space through the last months of the year than had been seen across several previous years. One tell: Coinbase, the biggest crypto exchange in the United States, saw a doubling of its customer base between the short period last year that spanned the months of March through October.

Given the global nature (frenzy?) that marked the space, the damage has been widespread, with marked impact in South Korea and Japan. In one anecdote recounted by the Times, a woman brought funds to bear on cryptos, having tapped savings, insurance policies and a loan – all to the tune of $90,0000 – and is down about 90 percent.

Stories abound and will continue to abound. And in taking stock, keep in mind that plummet came amid news of ICOs that went nowhere, where software and projects tied to the offerings went nowhere and several scams were exposed. In fact, some estimates came just last week that ICO scams have cost investors $100 million.

In a world where the business models (the ideas ostensibly underpinning the ICOs) seem to come second, and still do, timing is everything, and still is.

Past is prologue, as the saying goes. In this space just last month, we noted findings from Boston College that showed that 4,000 ICOs had raised $12 billion. But more than half of them flamed out in the space of just four months after tokens were sold. One of the duo responsible for the Boston College paper, PhD candidate Hugo Benedetti, took note of the gold rush that comes when the timing is spot on. Choose the right one, and happiness ensues as returns for those that did survive had been 179 percent (though this was before the impact of downdrafts in the past few weeks).

And then again … beyond timing, what of fundamentals? We wrote last week that a series of charts illustrated boom and bust, via an analyst named Mike Shedlock (via a site named MishTalk), one that lends a picture to those aforementioned stories of financial ruin.

Starbucks has said no one will be able to buy lattes with bitcoin, not yet. The U.S. Securities and Exchange (SEC) last month stated that it would not (yet) allow the launch of cryptocurrency exchange-traded funds (ETF) – and a new decision on that matter looms tomorrow. No one seems to be all that sure whether or not cryptos are securities. If it comes out that XRP is a security, for example, then taxes will surely hit hard. We noted that these and other controversies govern the whys and hows of cryptocurrencies – and, in the meantime, the bust feels rather long-lasting.