Bitcoin Is Crashing and All Grown Up

At the beginning of 2010, the price of one Bitcoin was around $0.01. At its peak, last November, it hovered near $70,000 — a nearly 700 million percent increase in value in just over a decade. Even Warren BuffettBerkshire Hathaway’s, widely regarded as one of the greatest and most stable investments of the past half-century, grew by a staggering 1.8 million percent between 1964 and 2014. Naturally, With the massive growth in crypto, Wall Street has seen these numbers go up over the past few years and with a bit of FOMO, they decided to get on the crypto gambling circuit. Hedge funds started buying into crypto, Coinbase went public last year at a staggering $328.28 per share, bringing the company’s value to over $100 billion. Some mutual funds have even begun to diversify into what is commonly referred to as simply “digital gold.”

Well, this week it looks like Wall Street just learned the old adage: Be careful what you want.

In just 24 hours, $200 billion has been wiped off the crypto market as the value of Bitcoin has dropped. Shares of Coinbase are down 50% just last week and more than 80% from their IPO peak last year. Shit hit fans with such speed that the company headquarters had to post notices telling users that if Coinbase went bankrupt, users’ assets would be unprotected and could be used to pay in debt. Luna, which is said to be a “stablecoin” pegged to the dollar and should not fluctuate in value, dropped a dizzying 98% in a span of 5 days, causing the coin to lose $25 billion in value and cause it hovers at almost worthless. BitPrime, the New Zealand-based crypto exchange, had to suspend trading on its platform because, according to the company, “combined with extreme market volatility” it actually has no value. liquidity to be able to return money to crypto-investors. On several crypto Reddit threads, people told stories of investors they knew who were trying to commit suicide due to losses this week. “My friend and former colleague (my manager for 15 years) attempted suicide this morning. He basically moved all his savings to crypto in 2021 and LUNA is a big player in his portfolio,” one person wrote.

So what’s going on?

This is where Wall Street bankers come in. For a while, Bitcoin and other crypto assets will go in the opposite direction of the stock market. If the market crashes, the digital asset will rise, just as one side of the scale pushes the other in the opposite direction. But when these financial systems have been brought together over the past year, what went down, now goes together. Things are becoming entangled in a giant, messy financial soup. Many mutual funds, hedge funds, parent and child investors, and venture capitalists have large stakes in the crypto world. And volatility is seeping from one universe to another. Unlike previous major crypto sell-offs, these assets are now increasingly tied to the S&P and Nasdaq, which are informing what happens to the Dow and beyond. And while virtually all markets have plummeted in recent weeks, some have been hit as abrupt as tech stocks, once the darling of the investment world. Tesla is down about 26% from a month ago, such as Apple down about 17%, and Amazon down a staggering 30% in the same period — just to name a few. (One of the biggest and most talked about drops, alongside Coinbase, is Shopify, which has seen around 80% of its value wiped out in the past six months.)

One of the problems leading to the current turmoil in the financial markets is the lack of oversight of cryptocurrencies and the constant extreme volatility. In March, President Joe Biden issued an executive order to review cryptocurrency and its extreme price volatility, in hopes of protecting U.S. consumers, investors, and businesses from “systemic financial risks posed by assets.” caused by digital assets”. And in a recent Federal Reserve report on financial stability in the United States, the central bank noted that one of the (many) potential risks to financial markets is a lack of clarity around financial markets. Around “stablecoins”, which are supposed digital currencies, the assets have remained stable and over the past week have shown volatility similar to that of the rest of the digital market. The Fed suggested in its report that if there is an “escape” for digital currencies, or even a lack of confidence in them, the entire digital economy could collapse as a result. to pour. Many Bitcoin investors have always resisted government regulation and surveillance, citing that the anonymity and independence of currencies (with no connection to the government) are an integral part of the business. their basic premise, but after the pure madness and volatility of the past week, perhaps crypto investors will welcome these regulators with open arms.

https://www.vanityfair.com/newsletter/2022/05/bitcoin-crashing Bitcoin Is Crashing and All Grown Up

Sarah Ridley

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