The cryptocurrency circle is never short of topics, but this time the topic is a decline, and it's a waterfall-like drop.
On June 18, Beijing time, Bitcoin fell below $20,000 for the first time since December 2020. But this was not the end of the downward channel. Subsequently, Bitcoin dipped to a low of $17,601. Additionally, the consecutive 12 days of decline set a record for the longest continuous drop since its inception in 2009.
Of course, the crash is far from just Bitcoin. According to quotes from Coindesk (Bitcoin news source), the second largest cryptocurrency by market capitalization, Ethereum, fell nearly 11% to $975.24 on June 18, reaching its lowest point since January 2021.
In other words, these two leaders in the cryptocurrency market have fallen nearly 70% from last November's historical highs (Bitcoin reached a historical peak of $69,000 per coin in November 2021).
Equally astonishing are the huge losses that the decline has brought to investors. According to Coinglass data, as of 8 AM on June 19, over 124,000 people in the entire cryptocurrency market were liquidated in the past 24 hours, with a total liquidation amount reaching $459 million, equivalent to approximately 3.083 billion yuan.
The so-called liquidation is almost a total loss. This level of total loss raises the question of why the cryptocurrency circle has such a high 'destructive power,' yet there are always people rushing in.
Perhaps it is because the cryptocurrency circle has more wealth 'myths.'
If we regard the price of $0.0025 in 2010 as the starting point (an American programmer exchanged 10,000 bitcoins for 2 pizzas), then the price curve of Bitcoin over the past decade represents an unparalleled huge increase.
Not only that, Bitcoin has also contributed to the wealth of the richest Chinese. In November 2021, when Bitcoin reached a peak of 460,000 yuan ($69,000), Zhao Changpeng, who controls the trading platform Binance, saw his fortune rise to 610 billion yuan ($95.9 billion), surpassing Li Ka-Shing and Zhong Shanshan, becoming the new richest Chinese.
It is worth noting that Zhao Changpeng's exchange, Binance, made a profit of $200 million in just six months, and he himself has completed in a few years what other rich people take decades to achieve, which is why the saying 'A day in the crypto world is like a year in the real world' has become well-known.
In contrast, stock guru Warren Buffett made over 90% of his money after turning 60. From a different perspective, Buffett's wealth growth was not fast for a long time.
In a world where making money is the hard truth, some Bitcoin participants at a certain stage did indeed become wealthy. Similarly, participants who want to replicate this success will inevitably look down on Buffett's 'wealth-building'—the main difference between 'getting rich' and 'wealth-building' is speed.
Impatience and emotional urgency can easily make people forget the originally clear investment logic. Just as most investors know, it is difficult to evaluate cryptocurrencies, including Bitcoin, using valuation models. Because in classic valuation models, an asset's value depends on the cash returns it can generate (numerator) and your required rate of return (denominator). For example, a hen can lay eggs, a business can generate income, bonds can pay interest and principal... but the rise of cryptocurrency is self-reinforcing: the more it rises, the more people buy, the more scarce the currency becomes, and the more significant the profit effect.
In this sense, it is not difficult to understand why Buffett stated last year that he was 'unwilling to spend $25 to acquire all Bitcoins,' even though at that time, a single Bitcoin had already exceeded $38,000. Cryptocurrency is a price symbol, but only exists through trading. In the words of Paul Krugman, 'If speculators suddenly have a collective moment of doubt and fear that Bitcoin could become worthless, then Bitcoin will become worthless.'
Investing may lead to wealth, but it is highly unlikely to match the wealth-generating efficiency of cryptocurrencies. However, gains and losses come from the same source; when you treat the market like a casino, the market will see you as a gambler—there will always be someone making a fortune, and there will always be a day when the bubbles burst.
