$1 Trillion in crypto goes >poof<!

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/articles/how-more-than-1-trillion-of-cry…

**illion of Crypto Vanished in Just Six Months**
**The helium is coming out of bitcoin and other cryptocurrencies as investors shy away from risk**

**By Peter Santilli and Corrie Driebusch, The Wall Street Journal, May 13, 2022**

**Traders’ flight from risky investments has halved the price of bitcoin and other cryptocurrencies, wiping out more than $1 trillion worth of digital money since November.**

**Wild swings are fairly common with cryptocurrencies, but even seasoned investors were left reeling as bitcoin dropped 29% over a seven-day losing streak that just ended as a stablecoin—one part of the crypto world that touted its stability—unexpectedly crashed.**

**Investors are staring at an inflection point in the financial markets as interest rates rise and inflation rages, and they are responding by selling risky assets....** [end quote]

People have put real, actual USDs into buying cryptocurrencies. Since the US GDP is $24 Trillion, the vanished $1 Trillion is equivalent to evaporating 4% of GDP. Some of this was hard money (capital) and surely some was borrowed and will need to be repaid. But it was real money which vanished.

That isn’t counting the huge amounts lost in the stock market, especially the NAZ.

The Fed wanted to take air out of the balloon. They’ve only raised the fed funds rate to 0.75%, still a strongly negative real rate. They want to raise the rate to “neutral.”

Will the bubbles decline gently or will they burst suddenly?

Wendy

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People have put real, actual USDs into buying cryptocurrencies. Since the US GDP is $24 Trillion, the vanished $1 Trillion is equivalent to evaporating 4% of GDP. Some of this was hard money (capital) and surely some was borrowed and will need to be repaid. But it was real money which vanished.

Crypto is an asset, not income. You probably should be comparing it to the $200 Trillion plus value of all US assets. It’s only about 0.5% of that – lost in the round off. Heck, on a lot of days my portfolio is up or down more than 0.5%.

intercst

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. But it was real money which vanished.

Not necessarily - or at least not in any way that may really matter.

If I purchased a baseball card for $5 and it went up in value to $500, then back down in value to $100, Did $400 in real money vanish? Or, does $95 in fictitious value still exist?

Now certainly anyone that purchased such a card at $400 is sitting on a significant loss in value, but on the macro level, did that wealth ever really exist or did it just change hands (minus the transaction fees)?

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I’m curious if you know how much value in fiat currency has gone “poof” over the last six months due to inflation?

-IGU-

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  1. Crypto is worldwide, so comparing to US GDP isn’t very useful.
  2. Crypto is an asset with zero yield, so it produces nothing and doesn’t really contribute to US GDP.
  3. My own opinion is that crypto is mostly used to transfer “real” money from western countries to Eastern European and Asian countries. They “mine” something that produces nothing, and then sell it to westerners. Not ALL, but much of it.
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