Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter
Down 70% from the peak. This is just not fun anymore.
Bitcoin dropped to $5,860 at the moment, below $6,000 for the first time since October 29, 2017. It has plummeted 70% in six months from the peak of $19,982 on December 17. There have been many ups on the way down, repeatedly dishing out fakes hopes, based on the ancient theory that nothing goes to hell in a straight line (chart via CoinMarketCap):
If you’re a True Believer and you just know that bitcoin will go to $1 million by the end of 2020, as promised by a whole slew of gurus, including John McAfee – “I will still eat my dick if wrong,” he offered helpfully on November 29 – well you probably don’t need this sort of punishment. You’re suffering enough already. And I apologize. I feel your pain. I was a true believer too a few times, and every single time it was a huge amount of fun, and I felt invincible and indestructible until I got run over by events.
With 17.11 million bitcoins circulating today, if bitcoin were at $1 million today, it would amount to a market cap of $17 trillion. But new bitcoins are constantly being created out of nothing (“mined”) by computers that suck up enormous amounts of electricity. And by the end of 2020, there will be many more bitcoins, and if the price were $1 million each, the total would amount to about the size of US GDP.
This doesn’t even count all the other cryptos that would presumably boom in a similar manner, amounting perhaps to half of global GDP, or something.
People who promote this brainless crap are either totally nuts or the worst scam artists. But I feel sorry for the True Believers whose fiat money got transferred and will continue to get transferred from them to others.
So OK, there’s still some time left. It’s not the end of 2020 yet. And True Believers still have room for the fake hope of a $1-million bitcoin.
But at the moment, bitcoin is even worse – incredibly – than one of the worst fiat currencies in the world, the Argentine peso, which has plunged “only” 35% over the period during which bitcoin plunged 70%. That takes some doing!
There is always some reason or other that is cited for the drops: The endless series of hacks into exchanges during which crypto tokens and coins just vanish. Nervous regulators cracking down on the scams surrounding cryptos, initial coin offerings (ICOs), and how they’re being promoted. Or advertising platforms such as Facebook, Google, and Twitter, and email newsletter platforms restricting ads and promos about cryptos and ICOs.
And then there were studies that showed how Tether, via the crypto exchange Bitfinex, was used to manipulate up bitcoin last year. Manipulation is good as long as it is upward manipulation. But it’s apparently not working anymore.
A lot of big hedge-fund and family-office money was plowed into it last year with great fanfare that was thickly plastered all over the media, thus creating artificial demand for something useless that is in artificially limited supply. It worked amazingly well for a while. Now these funds are having trouble getting their money out without crashing the cryptos any further.
Whatever it is, it’s just not fun anymore.
In the end it’s always same: A miraculous ascent of anything begets more buying in the belief that this miraculous ascent will continue, and it continues until some folks decide to pull their money out. They have the early-mover advantage and they’re laughing all the way to the hated fractional reserve bank with their hated fiat currency. Everyone else is getting dragged down.
The overall crypto space peaked on January 4, when market cap reached $707 billion, according to CoinMarketCap. Less than six months later, market cap has now plunged by 66% to $243 billion, despite continued creation and sale of coins and tokens that add to that number.
Among the other biggest cryptos:
Ethereum plunged 68% from its peak of $1,426 on January 13, to $440 at the moment. Market cap collapsed from $138 billion to $44 billion:
Ripple plunged 88% from its peak of $3.84 on January 4 to $0.453. Market cap went from $148 billion to $17.8 billion.
Bitcoin Cash plunged 83% from its peak of $4,138 on December 20 to $679 at the moment. Market cap dropped from $70 billion to $11.6 billion. On November 12, I featured Bitcoin Cash in an article subtitled, “Peak Crypto Craziness?” where I was observing how it quadrupled in two days to $2,448.
EOS plunged 59% from its peak of $18.16 on January 12, to $7.18. I pooh-poohed it on December 18 with “The Hottest, Largest-Ever Cryptocurrency ICO Mindblower.” The purchase agreement that buyers in the ICO had to sign – the ICO was not offered in the US due to legality issues – stated explicitly that holders of EOS have no rights to anything related to the EOS platform, and that they get nothing other than the digital token. A perfect digital scam surrounded by piles of logical-sounding gobbledygook.
Litecoin plunged 79% from its peak of $363 on December 19, to $76 at the moment. Market cap went from $19.7 billion to $4.3 billion. Its founder admitted on December 20 that he’d wisely cashed out his entire stake, with the first-mover advantage. The True Believers have simply gotten run over by events.
There are now 1,586 cryptos listed on CoinMarketCap. Anyone can create them, and they do. This compares to about 160 fiat currencies. And in the end, it was fun for those that got out in time – those that grabbed the first-mover advantage in one of the most elegant wealth transfers of the century.