After the cryptocurrency boom: hard lessons for new investors

SAN FRANCISCO – Pete Roberts of Nottingham, England, was one of the many at risk who threw their savings into cryptocurrencies when prices were passing the roof last winter.

Now, eight months later, the $ 23,000 invested in several digital tokens is worth about $ 4000 and has a clear view of what happened.

"I was too caught up in the fear of losing and trying to make money fast," he said this week. "The losses have practically left me financially ruined."

Mr. Roberts, 28, has a lot of company. After the last round of big price declines, many cryptocurrencies have returned all the huge gains they experienced last winter. The value of all the digital tokens in circulation has decreased by about $ 600 billion, or 75%, since the January peak, according to data from the site coinmarketcap.com.

Virtual currency markets have gone through booms and busts before – and recovered to expand further. But this failure could have a more lasting impact on the adoption of technology because of the huge number of ordinary people who invested in digital tokens in the last year and probably will associate cryptocurrencies with financial ruin for a time. very long.

"What Joe's average hears is how friends lost their luck," said Alex Kruger, a former banker who has been in the cryptocurrency market for some time. "Irrational exuberance leads to financial swings and slows progress."

It is hard to know how many cryptocurrency investors are now in red, with holdings that are worth less than the money they put. Many who have lost money in recent months have entered the markets before the great run-up last year, and their holdings are worth more than their initial investments.

But with a lot of metrics, more people put money in virtual currencies last fall and winter than all the previous nine years or so. Coinbase, the largest cryptocurrency broker in the United States, has doubled the number of customers between October 2017 and March 2018. Square start-up has begun to allow users of its mobile app, Square Cash, to buy Bitcoin last November .

Almost all new customers on Coinbase and Square would be in red if they had purchased cryptocurrencies in almost all the points of the last nine months and held them back.

The damage could be particularly negative in places like South Korea and Japan, where there was a minimum cryptocurrency activity before last year, and where ordinary investors with little experience they joined with the abandonment.

In South Korea, major exchanges opened physical store windows to make it easier to invest for people who did not feel comfortable doing it online. The offices of a large stock exchange, Coinone, only had one customer walk during a two-hour period in the middle of last week's day. An employee, Yu Ji-Hoon, said "the prices of digital tokens have decreased so much that people seem to feel upset."

Kim Hyon-jeong, a 45-year-old teacher and mother of one who lives on the outskirts of Seoul, said he had grossed around 100 million won, or $ 90,000, in cryptocurrencies last fall. He attracted savings, an insurance policy and a loan of $ 25,000. Its investments have fallen by around 90 percent.

"I thought cryptocurrencies would be the only turning point for normal and hard-working people like us," he said. "I thought that my family and I could escape the difficulties and live more comfortably, but it turned out the opposite."

In the United States, Charles Herman, a 29-year-old businessman in Charleston, SC, became obsessed with virtual currencies last September. He said that now he felt like he had wasted 10 months of his life trying to play in the markets.

While he basically returned to the $ 4,000 he put, he has soured the revolutionary promises that virtual currency enthusiasts have been doing for technology last year and has resumed investing his money in real estate.

"I think we thought we were" attacking the man "when I got on board," Herman said. "But I think" the man "has already noticed and had an exit strategy."

Much of the anger that investors feel towards the smaller virtual currencies, or alt coins, that entrepreneurs sell in the so-called initial money bids. These coins should have served as payment mechanisms for the new software that the entrepreneurs were building.

But almost none of these companies delivered the software they promised, leaving the tokens useless, if not as speculative resources. Several coins have been exposed as definitive scams.

"I think I'd like to see most of the monsters go to zero before they feel that the whole space is not too expensive," Herman said.

Bitcoin has generally held better with investors. It is down about 70 percent from historic highs, rather than 90 percent losses that have suffered lesser-known digital tokens. But even this has struggled to earn a lot from speculative investment.

"We also saw that Bitcoin is not ready for mass adoption and day-to-day use," Herman said.

Despite this pessimism, social networks where cryptocurrency fanatics gather to exchange information are full of people talking about their intention to keep their coins, hoping they will recover once the technology has time to catch up with the clamor.

Tony Yoo, 26, a financial analyst in Los Angeles, invested more than $ 100,000 of his savings last fall. At their lowest point, its holdings have lost almost 70% in value.

But Mr. Yoo is still a big supporter of the idea that these tokens can provide a new way to make online transactions, without the big intermediaries of the companies we rely on today. Many of the groups that raised funds last year are still working on the products they have promised, with a lot of serious engineers designed for the projects.

"There's a lot more behind this new wave of technology and innovation that I'm sure will take control of our company in due course," said Yoo.

With low prices, he said he was actually trying to put more money into the markets.

That reflection was encouraged by the people who invested in Bitcoin in 2013, when it first exceeded $ 1,000. That market was followed by an incident in which the price of Bitcoin fell more than 80%. But after a long period of rest, the price recovered. Even with recent losses, the value of a Bitcoin is around $ 6,500 – more than 500 percent compared to the peak of 2013.

"Five years ago, I was broke, unemployed and I was ashamed to use my real name , "Ryan Selkis, a popular virtual currency personality, wrote on Twitter last week . "For the new fanatics, your 14-month downdraft remains, 85% and you will not regret it."

Twitter is also full of complaints, like that of a user named @Notsofrugaljoey, who wrote: "It's really hard stomach to lose all my hard earned money." Just burst and cry. "

On Reddit, a user in the United Arab Emirates posted a photo of the $ 100,000 loan he had bought in December to buy cryptocurrencies – and he will now pay his salary for the next three years.

Mr. Roberts, the British investor who has seen most of his $ 23,000 gone, is holding his coins in case they turn around. But for now he has stopped trading and is looking for another job.

"I am living on the small savings that have remained on my bank account," said Roberts. "I made a mistake and now I will have to pay the costs for the next few years."

Follow Nathaniel Popper and Su-Hyun Lee on Twitter: @nathanielpopper and @esuhyuni ​​

Su-Hyun Lee reported from Seoul, South Korea.

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