This is not like the dotcom crash – though it’s even more brutal.
Cryptos are having another bad-hair day, one in many, with just about all the largest ones crashing 12% to 25% this morning.
It’s crypto mayhem for those who’re watching their wealth evaporate, after having gleefully watched it balloon in multiples of 10 or 100 in a matter of weeks and who expected to be billionaires by year-end. At the time, which was just a few weeks ago, they’d touted whitepapers full of intelligent-sounding gobbledygook as to why these price surges were based on fundamentals, and how these cryptocurrencies would change the world.
By now, there are a gazillion of these cryptos. Anyone can issue new tokens. According to coinmarketcap.com, there are now 1,513 of them out there, about 100 more than last time I pooh-poohed them on January 17. They multiply like rabbits, and as long as there’s anyone out there still silly enough to put real money into them, the issuers of these new tokens are going to get rich. The reason why there are scams is because scams work.
Total market capitalization, according to coinmarketcap.com, is now at $335 billion. This is down by 52%, or by $372 billion, in just one month from the peak on January 4, an era when market cap was headed to $2 trillion by the end of 2018, and when RBC Capital Markets prophesied it would reach $10 trillion over the “longer term.”
Meanwhile, said market cap is evaporating with blistering speed.
Here are the biggest losers in terms of the hated fiat currency, the US dollar, though losses are even larger in other currencies that gained against the dollar recently:
-$211 billion: Bitcoin plunged 15% this morning to $7,277. It has now plunged 64% from its peak of nearly $20,000 on December 17, when it was still going to go to $1 million. At the time, market cap was $333 billion. Now down to $122 billion. Bitcoin speculators have surrendered $211 billion.
-$119 billion: Ripple plunged 16% this morning to $0.71 and 81% from its peak of $3.79 on January 4. Over the same period, market cap went from of $147 billion to less than $28 billion at the moment, with speculators giving up nearly $119 billion.
-$68 billion: Ethereum plunged 18% this morning to $718, and is down nearly 50% from its peak of $1,426 on January 13. Market cap has plunged from $138 billion to $70 billion, with speculators watching collectively how $68 billion have vanished in three weeks.
-$52 billion: Bitcoin cash plunged 19% to $932 this morning and 76% since its peak on December 20 of $4,020. Over these six or so weeks, market cap plunged from $68 billion to less than $16 billion now. $52 billion gone.
-$24 billion: Cardano plunged 17% to $0.32 this morning and 74% from peak of $1.27 on January 3. Over the same period, market cap was whittled down from $33 billion to $8.5 billion. Over $24 billion gone in about a month.
-$13 billion: Litecoin – whose founder admitted on December 20 that he’d wisely cashed out at the peak by selling his entire stake to true believers who are now eating the losses – plunged 15% this morning to $129, and 63% from the peak on December 18. Market cap went from $20 billion to $7 billion, with $13 billion having turned into smoke.
-$13 billion: NEM plunged 17% to $0.46 this morning and 75% from the peak of $1.95 on December 3. Market cap went from $17.6 billion to $4.2 billion. Over $13 billion gone.
-$6 billion: EOS – whose Initial Coin Offering I ridiculed on December 18, at which time the token traded for around $10 – went on to over $18 on January 12, before plunging. Today it’s down 12% to $7.70, and down 56% from its peak. Market cap plunged from $11 billion to $5 billion, giving up $6 billion in three weeks.
Pretty soon, you’re starting to talk about some real money.
$372 billion have evaporated in just a few weeks. Banks are worried about getting exposed to it via the mechanism of credit. Many of the largest banks are now preventing credit card transactions with cryptocurrency exchanges. They’re worried customers borrow on their credit cards to get rich quick, while paying 27% or so in interest, only to watch the crypto wealth disappear, after having made someone else rich quick. Banks are worried about the ensuing defaults on credit card debts.
Regulators too are cracking down around the globe, years behind the curve. And hedge funds that have plowed other people’s money into this scheme and seen returns of 1,000% or more last year, now can’t get their money out without crashing the crypto market further, given the hedge-fund sums involved and the absence of liquidity, and some are going to blow up. But they’re relatively small funds, and they don’t matter.
And the impact on the overall US economy?
It will be tiny, outside of the faintly audible gnashing of teeth among the stiffed ones. The $372 billion that have already evaporated, and future evaporations, are spread around the globe and are concentrated in Asia. So the impact on the economy in the US will be negligible, unlike the dotcom crash in 2000-2002, which was heavily concentrated in the US.
No one is even talking any longer about the concept hyped until a month ago that these tokens were the best “store of value” or the concept hyped a year ago that these tokens are the next world currency. By now it is clear to everyone that they’re just an unregulated form of online gambling, peppered with plenty of scams to add some spice.
But these things will bounce. They always do, on the principle that nothing goes to heck in a straight line. And hundreds more cryptos will be issued over the next few months as long as anyone is still out there buying them, and a plethora of intelligent-sounding gobbledygook whitepapers will accompany them to show why they will change the world.
“Blockchain stocks” are already well on their way. It’s not a pretty sight. Read… “Blockchain” Stocks Collapse by 40% to 90%