Bitcoin. It had to happen, sooner or later.
As any serious investor in variable investments — including the out-of-control and difficult to understand cryptocurrency market — knows, any investment that can go up in a hurry can also go down in a hurry. The greater the potential for gain, the greater the potential for loss. After all, it’s a fundamental tenet of investing that inevitably happens — sooner or later, in cyclical fashion.
Let me begin with this admission: As a former Certified Financial Planner (CFP), I know next to zero about the cryptocurrency market, blockchains, and so forth — mostly on purpose. But what I do know as a former CFP are a few key rules for investing in equities and variable markets:
- Don’t put all of your eggs in one basket.
- Any investment that sounds too good to be true is.
- The riskier the investment, the smaller percentage of one’s overall portfolio should be placed in it.
- Ultimately, don’t invest more in speculative markets than you can afford to lose.
And, as a former investment advisor and portfolio manager, I know quite a bit about asset allocation, portfolio rebalancing, portfolio optimization and re-optimization, and most importantly, risk management assessment — on a per-investor basis. My point?
Getting caught up in the crypto craze, ignoring all of the above basics, and throwing caution to the wind can not only lead to financial disaster — for individual investors and institutional investors alike — it is happening “as we speak.”
So, how bad is it? As reported by Forbes on Thursday, the cryptocurrency market has fallen roughly $1 trillion in value, in 30 days. To paraphrase Barack Obama’s pastor, Jeremiah Wright, the crypto chickens are coming home to roost — and those chickens are destroying lives as we speak.
Bitcoin and [other] cryptocurrencies have crashed further overnight, dropping to levels not seen since the crypto market began surging in late 2020 and wiping away almost $1 trillion worth of value in a month as a serious “ripple” warning comes into effect.
Yikes. But — but — but, it was a sure thing! Sorry, there is no “sure thing” in the variable markets.
The bitcoin price has dropped to around $27,000 per bitcoin, down 12% on the last 24 hours, and dragging down the wider crypto market https://t.co/77256hjdDv
— Forbes (@Forbes) May 12, 2022
Here’s more, via Forbes:
The bitcoin price has dropped to around $27,000 per bitcoin, down 12% in the last 24 hours, and dragging down the wider crypto market with other top-ten coins — Ethereum, BNB, XRP, Solana, Cardano, and Avalanche, all losing between 25% and 33%. Ethereum has crashed 22% since Wednesday afternoon.
The sell-off comes after the $18 billion algorithmic stablecoin terraUSD (UST) lost its peg to the U.S. dollar, wiping out the price of its support coin luna, which has now lost almost 99% of its value — and risks dragging the bitcoin and [other] crypto markets even lower.
As further reported by Forbes, crypto investors panicked on Thursday as bitcoin plummeted to its lowest price in more than a year, and other cryptocurrencies endured even worse sell-offs.
Victims of the crypto bloodbath — which comes amid a broader stock market rout — range from billionaire crypto titans who run leading marketplaces, to retail investors who have foolishly poured their life savings into cryptocurrencies.
One retail investor posted on Reddit that the only way out for him is suicide, as transcribed by The New York Post.
“I lost over 450k USD, I cannot pay the bank,” reads one of the top posts on the Reddit forum for Terra Luna, a cryptocurrency that has lost more than 99% of its value over the past week. “I will lose my home soon. I’ll become homeless. suicide is the only way out for me.”
Another Reddit post reads:
My ex-colleague attempted suicide. He basically moved all of his savings to crypto in 2021 and LUNA was a massive player in his portfolio.
It gets worse, as noted by The Post.
Shares of Coinbase, the only major publicly traded cryptocurrency exchange, have fallen 84% since the company went public in April 2021. The company warned customers on Wednesday that their cryptocurrency holdings could be at risk if Coinbase goes bankrupt, although CEO Brian Armstrong insisted that bankruptcy isn’t in the cards.
Maybe it is and maybe it isn’t, but even Armstrong said what I said at the beginning:
I feel for anyone who has been badly beaten up by what’s happening. You shouldn’t put more into this than you can afford to lose.
Yet, as hucksters and infomercials alike continue to shill for bitcoin and other cryptocurrencies — not unlike Rosland Capital pimp William Devane incessantly pimping gold — P. T. Barnum was right: There’s a sucker born every minute.
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