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 bloodbath — which comes amid a broader stock market rout — range from the billionaire crypto titans who run leading marketplaces such as Coinbase and Binance to lowly retail investors who have poured their life savings into cryptocurrencies.
“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.”
“My ex-colleague attempted suicide,” reads another top post on the forum. “He basically moved all of his savings to crypto in 2021 and LUNA was a massive player in his portfolio.”
While Luna’s collapse is the most spectacular, other cryptocurrencies are also in freefall. Bitcoin was trading around $28,300 Thursday afternoon, down 20% over the past week and nearly 60% lower than its all-time high of $69,000 in November 2021. Other major cryptocurrencies including ethereum and solana are now worth fractions of their all-time highs.
The entire cryptocurrency market now has a market capitalization of $1.2 trillion — less than half of the $2.9 trillion it was worth in November, according to CoinMarketCap data.
“There’s a lot of folks out there who have taken some real bruises.” said Garrick Hileman, research chief at Blockchain.com. “In crypto, the strong tokens survive and the weak get flushed.”
In the past, drops in crypto have been touted online as a buying opportunity, which have juiced prices back up. Now with the threat of recession looming, it’s unclear if investors will “buy the dip.”
The ongoing rout gives fuel to detractors who have long argued that the decentralized digital currencies were a frothy fad fueled by low interest rates and pandemic-era stimulus checks.
Prominent crypto critics include JPMorgan Chase boss Jamie Dimon, who once said bitcoin is “worthless” — as well as billionaire Berkshire Hathaway executives Warren Buffett and Charlie Munger.
The 98-year-old Munger recently referred to cryptocurrencies as a “venereal disease” that he was “proud” to have avoided. Berkshire Hathaway shares are up 5.6% over the past six months, while bitcoin is down 56%.
The crypto crash comes as the Federal Reserve hikes interest rates in an effort to cool inflation, sending high-risk tech stocks into a tailspin. The tech-heavy Nasdaq composite index is down 30% so far this year and has been heavily correlated with the price of bitcoin in recent weeks, according to Refinitiv data.
“We see more overlap in ownership than we ever have, this kind of convergence between Wall Street and crypto,” said Hileman, who’s also a visiting fellow at the London School of Economics.
Investors who poured their money into buzzy tech stocks have taken a beating alongside crypto fanatics.
“Need help: LOST EVERYTHING in the stock market,” reads a popular post on the corporate message board Blind. “I invested every last dollar I saved in the stock market and I’m currently down almost 85%.”
The self-identified 29-year-old Home Depot corporate employee said he mostly owned shares of tech firms including Meta, Peloton and Spotify.
“They have all s–t the bed,” the employee raged. “Same thing with crypto.”
The fall in cryptocurrencies could also curb spending, and even national GDPs. The value of “non fungible tokens,” digital artwork called NFTs, increased along with cryptocurrency and will likely suffer with it. Meanwhile, Nayib Bukele, the new president of El Salvador, has tried to make that country reliant on crypto — its holdings are now down 28% and threaten the entire economy.
Bitcoin’s plunge is likely to scare off some of the retail investors who poured money into crypto during its stimulus-fueled surge, while potentially enticing those hoping to buy the dip, according to Chris Kline of Bitcoin IRA.
“It takes away the tourists from the true believers,” said Kline, who’s the COO and co-founder of the crypto retirement investment site with 100,000 users. “There will be folks that say, you know what, crypto’s just not for me. But there will probably be just as many new folks coming into the market.”
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.
While Hileman is optimistic about cryptocurrencies’ long-term prospects, he said the current downturn shows amateur investors need to be careful.
“I feel for anyone who has been badly beaten up by what’s happening,” he said. “You shouldn’t put more into this than you can afford to lose.”