Trillions of dollars lost, lives destroyed: inside Crypto’s Lehman Brothers

Even if you know nothing about crypto, Bitcoin confuses you, and you thought Ethereum was a Marvel character, which is not hard to fathom is that a cryptocurrency caused investors to lose money. huge sums and in some cases all they had. The crash was so spectacular that some people call it Lehman Brothers in the crypto world. The market value of cryptocurrencies, nearly $ 3 billion in November, is down to just $ 1.3 billion.

The largest crypto-trading platform in the US, Coinbase, lost half of its value in a week, warning users that they could lose their money if the company goes bankrupt. Founder Brian Armstrong saw $ 11 billion disappear from his personal fortune. He’s just one of those “crypto bros” who lost huge sums. A trader with 288,000 Bitcoin lost $ 800 million in one day after the price crashed, while Elon Musk saw his $ 1.5 billion Bitcoin investment lose $ 300 million.

Elon Musk saw his $ 1.5 billion investment in Bitcoin fall by $ 300 million in the recent cryptocurrency

/ TED, LLC / AFP Talks via Get

For the uninitiated, cryptocurrency is a “virtual currency” that is decentralized and therefore does not require an intermediary, ie a bank. It has been touted as a fairer way of doing finance, but it is completely unregulated and can be very difficult to predict.

This was shown on May 11, when a coin, Luna, fell in value, having a ripple effect on other coins. The fall was so catastrophic that questions arose about the future of the industry. Some say investors are so scared that it marks the start of a long “crypto winter,” while others have called it an “ice age.” With one in five young Londoners (18-34) investing in crypto, what will that mean for the capital, the UK’s cryptohype hub? Has the Bitcoin bubble finally burst?

Terra (Luna) called herself a “stablecoin”, but it turned out to be anything but. It lost over 99% of its value in 24 hours. The industry panicked, investors rushed to embezzle their money, and desperate Luna losers wrote online about how they would lose their homes.

The cause of the accident is being discussed among the parties involved. Some say it was due to a general decline in the financial markets. “It’s not just crypto, it’s everything,” said Oleg Giberstein, co-founder of London-based crypto-trading startup Coinrule. “Netflix is ​​down, tax values ​​have fallen. Markets are under pressure. Crypto is a risky asset class, so it’s the most affected. Oleg, who set up Coinrule three years ago, says Luna was also ‘an absolute disaster’.” I know many people who know the industry well and have lost a lot of money.It looked like a solid project but used unsustainable mechanisms.It was considered stable and safe but I never touched it as I thought the risks were minimized.There was an element of fake advertising, and people who knew nothing about crypto went into it because they thought it was relatively risk-free.

Brian Armstrong, CEO of Coinbase

/ Ethan Pins

Over the last few years, the crypto hype has peaked again. Professor of Financial Economics at Loughborough University, Alistair Milne, says this was due to the pandemic. “There were a lot of people who had time off during the lockdown and with some extra money. People feel more confident and excited.

For Professor Milne, this cycle of interest and crash is an inevitable part of something as fleeting as cryptography. “That’s what you should expect with crypto,” he says. “There’s no underlying value that determines the price, it’s short-term speculation – the news, what people think about it, what celebrities advertise it. When people are more worried, they withdraw their money and the price drops a lot. External factors like the war in Ukraine and rising inflation made investors more risk-averse.

This is not the first time the industry has collapsed. In 2017, the value of Bitcoin rose from £ 20,000 to £ 3,000. “Everyone wanted it to be the end and wondered if the bubble had burst,” says Oleg. “But it’s coming back. It’s a cycle. There’s a big upswing and then a crash every two or three years. With each new cycle we take bigger steps forward. Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, is not. so sure. “There’s been a shiver in the crypto market and I do not think it’s being washed away for the time being. I really think it’s all part of a race into risky assets. During the pandemic, crypto fans have been provided with a false sense of security. Now they are facing a rude awakening. So many people will have lost money this time. They thought they were making a quick buck, but had no idea what they were investing in.

Reuters

Susannah believes regulation is needed right away, and “stablecoins” will be targeted first. “It’s dangerous,” she said. “It all says that there are suicide warnings on some of the exchanges.”

What also struck her was that she had noticed that crypto had become a topic of conversation on the playground. “I hear moms talk about how their crypto-wallets pump, and I think do you have any idea what you’ve invested your money in?

“It’s a bet,” she adds. “You bet on a game for which you do not know the rules. They are not yet written. Do not invest unless you have money you do not mind losing.

A Londoner learned the hard way. In the recent crash, he lost £ 9,000. He has lost 50% of his investment and a third of his savings are locked in crypto, with his hopes of buying a house now out of reach. The 27-year-old, who wishes to remain anonymous, said: “I’m not trying to associate too many emotions with it. It’s easy to say now that I regret having invested so much money, but I did not say that when it went up.I went in and knew it was high risk and high reward.

For him, it was part of the call. “Buying a home is so inaccessible that things like this become more attractive.” He started there a year and a half ago and now has eight different cryptocurrencies. However, the accident resulted in him being re-evaluated. “I don’t want to get involved anymore for a while,” he says. “The worst thing I can do is panic and take it off, so I just want to be indifferent and in the meantime look for safer options. It’s a lot of money and it’s really cost me, but I made peace with it.

He is not the only one trying to accept a defeat. Rapper and YouTube star KSI tweeted that he had lost nearly £ 3 million. The luna he bought for $ 2.8 million dropped to $ 1,000, prompting him to tell his fans that he was “packing” his cryptocurrency. “It’s okay because I’m not dead,” he wrote. “I still have my family, my friends and my work ethic.”

Rapper and YouTube star KSI tweeted that he had lost nearly £ 3 million.

/ AFP via Getty Images

But for some, it has ruined their lives. A Reddit user said: “I lost over $ 450,000, I can not pay the bank. I will soon lose my house. I will be homeless. Suicide is the only issue for me.

Another who said he became a millionaire as a 20-year-old thanks to crypto lost his fortune and his girlfriend. “I was looking for good long-term teams,” he adds. “My cousin told me about Luna. I was really fascinated by what he told me, so fascinated that I decided my money would be safe there. Stupidly enough, I bought over 55,000 Luna for $ 80 + during the drop. Now it’s worth less than $ 500, and when he told the news to his girlfriend, she dumped him. “I wish I could go back in time,” he says.

Withdrawal involves using an exchange service, exchanging your crypto for pounds or euros and withdrawing it from your bank – though this is no longer an option for those who had Luna.

Oleg is optimistic that this is not the end of crypto and believes that London deserves to know its buzz. “In 2017 and 2018, one could hardly attend crypto events in London because of the interest. It crashed and everything became more comfortable, but it rebuilt itself and it will happen this time.

Sam Kopelman, UK Country Manager for Luno, a cryptocurrency exchange, agrees. “London has always been at the forefront of financial services, and the next step is to lead the world in crypto-innovation. Our research showed that almost one in five young Londoners now invest in crypto, in part because they are disappointed with the returns of the traditional financial system. Following a loan launch, the Treasury announced plans to make the UK a “global crypto hub” last month and the city will host the architects behind the UK crypto success.

Whether you think crypto is the future or just another way to play, defenders are not ready to give it up yet.

Leave a Comment