Kelly Bullis
What has been going on recently? Quite a few cryptocurrency firms have busted and are no more – FTX leading that pack. Folks who invested heavily in crypto over the last year have taken some pretty painful and huge losses. More than $2 trillion gone from peaks of a year ago! There are most likely going to be more crypto companies going out due to the negative momentum now in progress.
Investors are concerned about security and safety. When you purchase a crypto, somebody is taking U.S. cash in exchange. What do they do with that? Invest it in risky things like FTX did?
Did you know that banks hold a combined $9 billion-plus in crypto assets? That’s not very much. What do banks know? Maybe that crypto is not a secure investment? The average household in the U.S. holds only $1,000 in crypto, with the average in Europe more, around $5,000. The large holders of crypto are venture capital firms. Of the approximately 10,000 companies in the crypto business, only about 200 are publicly traded, the rest are bankrolled by venture capitalists, who now face sizable, if not near-total losses.
There is a glimmer of hope. Some of the major crypto currencies, like Bitcoin and Ether, will probably stick around. Can’t say the same for many others like Litecoin, Binance, Tron, etc. Bitcoin is still trading higher than it was in December 2018, even though it is down 75% from its peak in late 2021. Ether is up a lot from its low point. Major further reductions are obviously on the way though. Many exchanges will go away too.
The hardy folks still in crypto are mostly choosing to hold their “assets” in “digital wallets” that do not pay any interest, just preserve that base number of coins, whatever market value they are. Exchanges that survive will have to find a way to convince folks that they are more careful and trustworthy after the FTX fiasco. You can expect more government regulations to occur which will take more of the shiny luster off crypto as well.
Cryptos will need to convince the average potential user out there of their practical value and utility. There will no longer be any easy riches by investing in crypto, instead, if they survive, they will have to become a stable currency alternative to government fiat. The whole original alure of crypto was having a currency that is not tracked by government, not controlled by government. Will crypto succeed or just fade into the sunset as another good idea that got ruined by greedy speculation and lack of common sense protective controls? Only time will tell.
Have you heard? Job 28:18b says, “Yes, the price of wisdom is above rubies.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.