Are Bitcoin and some other digital currencies survivors, capable of withstanding intense market pressures? Or are they among the last of a dying breed?
Investors interested in cryptocurrencies are asking this question - and with good reason. Thousands of crypto coins have faded into history over the years, and nearly all of the others are on the ropes now. And what happens to them ultimately could impact heavily on stocks and other assets.
That’s why this recent headline on Zero Hedge grabbed investors’ attention: “91% of cryptos from 2014 have died, while Bitcoin continues to thrive.”
Not everyone agrees that Bitcoin is thriving, but the statement that numerous cryptos are gone forever is indisputable.
A Very Tough 2022
Many investments took it on the chin in 2022, but cryptos were a standout – not because they bucked the trend, but because they did even worse than almost everything else. The industry started the year valued at around $3 trillion but by year’s end had lost more than $2 trillion of that.
2022 was not the only awful year for cryptos. According to CoinKickoff, “91% of the coins that were present for the 2014 cryptocurrency market crash are now entirely abandoned. A large portion of coins that are now dead were created in 2017, with 704 now-dead coins being created that year... The worst year in cryptocurrency history goes to 2018, during which 751 coins became defunct.”
Even Bitcoin, the largest, best known and most widely used digital currency, was caught in crypto’s downward spiral and finished the year with a huge loss.
Bitcoin made an all-time high of $68,790 in November 2021. A $1,000 investment at that time is now worth in the area of $300. In mid-January 2023, Bitcoin was trading at approximately $19,300 – clearly off of the recent low but still down some 70% during these months. In fact, everybody who bought it in the last two years is losing big time.
But there is some encouraging news for the industry. Despite the battering, Bitcoin and other cryptos are still alive, accepted as payment by thousands of large and small businesses, and gaining more acceptance steadily.
Many large companies, for example, accept Bitcoin as payment, Microsoft, and AT&T among them. And so do 36% of small and medium businesses in the US, according to a survey by HSB.
Coinkickoff.com reports that “more than one million addresses now hold one or more Bitcoins.” In addition, “more than $14 trillion in annual transactions volume was carried over the Bitcoin network (in 2022), a 13,900% increase from 2015’s transaction volume.”
No one can say with certainty whether this trend will continue, but for the time being Bitcoin is the leading crypto and setting the pace for others to follow.
Lots Of Challenges
Given the carnage in the industry the surviving digital currencies have their work cut out and gaining wider acceptance is only one of their challenges.
But even more important is dispelling whatever doubts skeptics have that they are implicated in any way in the schemes and scams that have tainted the crypto industry. And this may prove to be the more difficult of the two.
FTX used to operate a cryptocurrency exchange and hedge fund; now it’s bankrupt. On January 9, it released a list of its top equity holders, and among them are extremely well-known sports stars, leading Wall Street hedge funds and respected investors. All of their investments in this firm are worthless now.
Other crypto news is adding to the industry’s already sullied reputation. One of those stories concerns the Winklevoss Twins, billionaires who made a fortune in crypto. But Cameron’s company Gemini crashed and he is blaming another billionaire. Meanwhile, hundreds of thousands of angry Gemini customers, unable to access over $900 million in crypto deposits, are suing. This story might have “staying power” and remain in the headlines.
And crypto exchange Coinbase is reducing its workforce – again – this time by 20% or 950 employees; the firm axed 18% of its workforce in June of last year. CEO Brian Armstrong called the current environment “dark times.”
Even more mysterious events are also taking place. At least four crypto billionaires have died in the month just before and during the collapse of FTX. No one can make a connection between their deaths and their investments, but they do raise eyebrows. According to Zero Hedge, “These deaths occurred under suspicious circumstances, and more importantly some of these billionaires have raised alarms about being in danger.”
One of them was found dead on a beach in Puerto Rico after tweeting that intelligence agencies were after him. A second was being investigated for the biggest cryptocurrency fraud in Spain. The third “died mysteriously in his sleep.” And the fourth died in a helicopter crash in Russia. And there was a fifth death, this the largest shareholder of a South Korean cryptocurrency exchange.
Although no one knows for sure what has really happened, rumors and gossip are swirling in the media. Also, it’s a good bet that in the coming weeks there could be more investigations, SEC charges, lawsuits, and counter lawsuits.
In any case, crypto has more tangible issues to think about, such as how gold-backed currencies might affect the industry, or whether the government will issue its own digital currency.
There are lots of lessons to be learned from what’s unfolding in the crypto industry, and maybe the most important is that investing in crypto should not be viewed as buying a Powerball ticket.