Late last year, Bitcoin eclipsed $15,000 for the first time, and at its height briefly touched values above $19,000. It was a wild ride, bringing the cryptocurrency market into the mainstream. Mom and dad were buying, I was buying—Russell was buying. It felt like an online gold rush, and rookie investors began flocking to the digital Yukon to strike it big. But a little over eight months later prices have absolutely plummeted, and this week the cryptocurrency market’s overall valuation dropped below $200 billion for the first time since 2017.
If $200 billion sounds like a lot of money, it’s because it is; but when you take into account that at its apex last year the market was valued over $800 billion, that’s a massive, massive loss in less than a year.
Yes, we’re in the midst of a crypto crash, and many of your friends and family may feel like they fell for fool’s gold.
If you’re unfamiliar with the concept of crypto, essentially it’s a computerized, decentralized currency not bound by the restraints of major banks or markets. You convert your physical cash into a digital coin—Bitcoin, Ethereum, and Litecoin are the most popular—and store it in an online wallet. You then utilize that wallet to make online purchases just like you would with a credit or debit card. Without the traditional tethers that work as valuation rudders for fiat money, a crypto coin’s value is highly volatile.
One day it may be worth $1,000, the next it may be worth $800. It’s like stocks with unpredictable trend lines—an investment version of The Scream Machine.
The cryptocurrency market’s current nosedive paints a clear picture of how erratic digital currency can be, and the more frightening part for major investors is there is not an inclination as to when the market will level off. It creates a sell-or-not-to-sell mentality that can drive even the most seasoned investor mad.
Cryptocurrency definitely has a role in the future. Its underlying technology provides the framework for many new startups, but no one knows when crypto will fully shift into the arena of the mainstream. Until then, strap in, because it’s going to be a wild ride.