Crashing crypto prices spooked some new investors. Others are doubling down

Crashing crypto prices spooked some new investors. Others are doubling down

London (CNN Business) Grant McGurn is really glad he jumped on a FaceTime call with his dad.

The 27-year-old office managerin Madison, Wisconsin, had put all of his investments into cryptocurrencies, including bitcoin, ethereum and dogecoin, a jokecoinwhose rapid ascent he considered entertaining if “ridiculous.” That alarmed his father, an experienced investor.

“He knew I had all my money in there and he was just like, ‘I’ve seen this before with the dot-com bubble crash, and I don’t want to see you lose thousands of dollars,’ " McGurn told CNN Business.

I don’t want to panic out of something I just ventured into.”

He heeded the warning and sold his crypto holdings in the middle of last month, just as a massive rout was taking hold . Many digital coins ultimately lost almost half their value, or more.

“I was lucky,” McGurn said. “I don’t think I’m the norm at all.”

McGurn is part of a legion of investors who are new to cryptocurrencies. Drawn in by the huge gains that started in late 2020 or excitement around dogecoin, they entered the market looking to make some quick money or to avoid missing out on the next big thing.

Now, on the heels of their first major sell-off, some are swearing off crypto investing for good, while others are determined to hold on, confident in its promise.

“I don’t want to panic out of something I just ventured into,” said Akshaya Parthasarathy, a 24-year-old living in Chennai, India.

New money rushes in

Tesla TSLA Mastercard MA BNY Mellon BK After a lackluster few years, bitcoin took off last December, quickly notching a string of record highs as risky investments soared following the US election. The mania accelerated whenannounced that it would begin accepting bitcoin payments for its cars. Other top companies, includingand, the oldest US bank, said they were expanding into crypto , signaling growing mainstream acceptance.

GameStop GME Amateur investors took notice — including many who were hunting for the next internet obsession after dabbling inin late January. In the first three months of the year, 9.5 million people traded cryptocurrencies on the Robinhood app popular among young investors, up from 1.7 million the previous quarter. Crypto platform Coinbase reported 6.1 million active retail users in the first quarter, more than double the last three months of 2020.

The mood only got more frenzied from there. Dogecoin, a cryptocurrency inspired by an internet meme featuring a shiba inu dog, began skyrocketing in April, ultimately hitting an all-time high of nearly 74 cents last month. That attracted even more speculative investors, some of whom placed additional bets on spinoffs that have no practical use and are known in the crypto community as “shitcoins.”

After reading success stories online or hearing them from friends, new traders “didn’t want to miss out,” said Lisa Kramer, a professor of finance at the University of Toronto who studies investor behavior.

Then came the crash. The market lived up to its volatile reputation, imploding after Tesla CEO Elon Musk, whose cheerleading fed the rise in dogecoin, tweeted that Tesla will stop accepting bitcoin payments due to concerns about the environmental impact of mining them. The resultant sell-off ultimately wiped more than $410 billion off the market value of bitcoin and nearly $25 billion off dogecoin.

But some crypto fans remain devout. In fact, small investors in bitcoin — defined as those holding between $37 and $37,000 — increased their holdings from nearly 4.8% to more than 5% of total supply during the recent sell-off, “suggesting increased interest as prices [declined],” according to data from researcher Glassnode.

On internet message board Reddit, the faithful have been encouraging each other to “buy the dip” so they can lock in future gains. Some have been rewarded; dogecoin, which during the recent sell-off fell as low as $0.22, rose back above $0.40 this week after Coinbase announced the launch of trading for users of its Pro service, though its price remains highly unstable.

According to Kramer, there’s a term in academia that can help explain this phenomenon: the “disposition effect.” Research shows that investors feel pain associated with portfolio losses more acutely than gains, and tend to fixate on the price at which they bought an asset. That often serves as a roadblock to offloading poor investments.

“This tendency to hold on to the poorly performing securities can end up continuing to cost the investor,” Kramer said. “Investors often make decisions based on gut instinct, but that can really lead them astray.”

‘Never again’

Many crypto investors say they’re still involved because they believe in the technology. Parthasarathy, who recently left her job to pursue a master’s in data science, used to be a crypto skeptic, but was intrigued by all the action surrounding dogecoin and started reading up online.

She ended up investing a small amount in ethereum, as well as hedera hashgraph and polygon, two tokens popular on Reddit’s main cryptocurrency forum. Before long, she was checking the WazirX app used to trade crypto in India “almost every five minutes.”

And though Parthasarathy admits the past few weeks have been gut-wrenching, she plans to stay invested.

“I’m seeing it as a long term thing, and I’m going to keep putting more money into it,” she said, adding that she only invested what she’d be willing to lose.

Rebecca Robinson, a 28-year-old student in San Diego who works part-time as a line cook, lost a few hundred dollars after Musk sent the market into a tailspin. She’s still putting 10% of her paychecks into crypto, including ethereum and the smaller coins cardano and algorand.

“People treat the coins like they’re sports teams,” she said. “If you have a lot of people who [say], ‘Yeah we believe in this coin!’ they’re not going to sell when it drops, and that’s cool.”

But she’s no longer relying on margin trading, which allows investors to borrow funds so they can make even bigger bets.

“Never again,” Robinson said. “It’s too scary.”

McGurn, who started trading crypto in late 2020, is also thinking about investing differently following the market’s recent collapse, even though he narrowly got out before losing money.

“It was kind of a wake-up call for me,” he said. “It’s good to have a little bit in speculative investments, but I can’t risk my life on this.”

Apple AAPL Amazon AMZN McGurn said he’s now planning to park his money inorstock, which he sees as “more solid” choices — though he did repurchase one ethereum coin.

“It’s just stupid,” he said. “I’m never going to have as much invested in crypto again.”

Crypto Asteroid Destroys Banking Dinosaurs

The Economist Satoshi Kambayashi - Bitcoin destroys banking dinosaurs - The Basis Point

This post originally appeared on The Basis Point: Crypto Asteroid Destroys Banking Dinosaurs

The Economist Satoshi Kambayashi - Bitcoin destroys banking dinosaurs - The Basis Point

I’ve had this Economist image on my desk for the past 7 days, and it’s very likely to become my wallpaper this weekend when I finally toss the May 29 issue. I call it Crypto Asteroid Destroys Banking Dinosaurs. Their artwork is always strong and this one speaks to me. Notice the dollar signs in the necks of the dinosaurs.

Of course the piece itself is deeper than that. It’s about whether crypto is a side show or a legit part of finance. It’s mostly focused on Bitcoin, but notes in one critical line that Ethereum has a more compelling use case.

I’m a banking dinosaur who’s only now forming opinions on crypto, which include:

– Only Bet What You Can Lose: For now, it’s better to view crypto as a purely speculative bet than an investment. Treat it like a Vegas trip. If you’re going to spend a few grand on a Vegas weekend and you’re also interested in the markets, maybe skip Vegas and buy the crypto. But treat the buy just like you’d treat the Vegas trip: lost money unless you get lucky.

– Know Your Blockchains: The Bitcoin blockchain and its bitcoin currency is believed by zealots to be a universal replacement for cash. We’re very far from that, so bitcoin’s gold-like scarcity (only 21m coins) and fame fuel arguments for it being an inflation hedge and a good long-hold investment. The Ethereum blockchain has much broader applicability — it’s basically a world computer that developers can build new companies and apps on (sort of like the web was built off the http protocol). As for its ether currency, that’s way more confusing because it doesn’t really have a supply cap. But of course people WAY smarter than me have theses as to why it’s also a great long bet.

– Know What Is/Can Be Build On Your Blockchain: I’ve asked some folks who’ve bought ether to explain what’s being built that they’re interested in, and they’re stumped immediately. Not a knock on them, just evidence there’s a sh!t ton of speculators out there. I recently bought my first crypto called Hash that’s the currency for the Provenance blockchain, which intended to modernize mortgage and consumer lending — among many other use cases. I’ll explain more in another post, but for now, I’ll say I bought it partly because of the (albeit large 100b) fixed coin supply, and mostly because I feel like I understand the potential of this blockchain and what’s being built on it. That’s my thesis more so than the price of the associated currency.

Story continues

– Buy In Slowly: And sure enough, I know nothing about the currency. I bought in the first few days Hash went live, and it’s halved since then. I thought the recent rout in major cryptocurrencies would result in more investment in this new coin, but not enough people know about this one yet. Also I should have bought in slowly so I could bid more shares on the way down, but instead I just took all the money I planned to bet and bet it all at once. Stupid. But whatever — it was 15 cents a share. And I don’t plan to sell anytime soon. Because my thesis also believes that the Provenance blockchain play is just getting started.

Does my first foray into crypto investing — I mean betting — make me a dinosaur that got destroyed by the crypto asteroid in a different way? More on that next time.

For now, enjoy this image. And links below on the piece/artist it came from.

Reference:

– Boundary between crypto and fiat money is becoming more permeable

– The artist that did this illustration is named Satoshi – seriously

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Bitcoin’s price slips as Weibo suspends crypto influencer accounts

More than two dozens of crypto influencers on Weibo suddenly found their accounts suspended by the Chinese social media company in what appeared to be a targeted censorship effort.

Around 10:00 UTC time on Saturday, Chinese users on Weibo started to share that as many as 25 accounts of influencers and media outlets who had been active in the crypto space became inaccessible.

Clicking into their user IDs now shows the user doesn’t exist, based on accounts verified by The Block. Each of these accounts previously boasted notable numbers of followers and were active in discussing bitcoin, crypto projects as well as decentralized finance.

SuperBTC, one of the most known Weibo influencers in China due to his long-time involvement in the community, also confirmed the unexpected suspension on Twitter:

“Weibo, the Chinese Twitter, has suspended many crypto influencers' accounts, including my Weibo account. Feel free to follow me here. At least Twitter is more crypto-friendly.”

The accounts of Chinese crypto media Blockbeats and 8BTC are also suspended.

Weibo has not given any specific reasons as to why these accounts have been targeted since some other notable Weibo accounts that also had hundreds of thousands of followers are still accessible. But the names of most of the suspended accounts today did bear terms such as “bitcoin,” “btc,” “blockchain” and “coin trader.”

It appears that such a targeted effort caused some fear over the crypto market’s sentiment.

Bitcoin’s price dropped by over 3% immediately after the Weibo suspension news began to circulate among the Chinese crypto community. It dipped to as low as $35,300 on Coinbase Pro and is now changing hands around $35,800.

The suspension follows comments issued by a China State Council meeting that mentioned how a crackdown on bitcoin trading activities will be a priority in maintaining financial stability.

This is not the first time Weibo has suspended accounts of crypto influencers or crypto businesses. It previously censored accounts that belonged to Huobi, OKEx and Binance as well as those belonging to Tron founder Justin Sun and Binance CEO Changpeng Zhao.