The cryptocurrency world is in shock as the world’s third largest exchange, FTX is bankrupt, Much has been said about the fall of FTX and its CEO, who was once dubbed the next Warren Buffet, but this article goes beyond a singular case and deals with cryptocurrency and S&P 500,
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Market volatility has attracted many investors to cryptocurrencies. The prospect of making a quick fortune has led some to mortgage their homes to buy bitcoin or put their life savings into alt- and shitcoins.
Buying shares was seen as boring. After all, if money dies because of inflation, what better way to hedge against inflation than with bitcoin? The shortfall should have made bitcoin immune to inflation.
It just didn’t happen.
The industry looks broken. Scammers took advantage of the lack of regulation in the space, so companies like FTX lost their customers by lending money when they shouldn’t have done so.
How Can One Still Trust Cryptocurrency Projects? I’m not saying these are all scams, but investing does require due diligence, and anyone who’s been doing a little research should be afraid to put even a dollar into cryptocurrencies.
We may only be at the beginning of a massive liquidation. No one says anything about Tesla’s bitcoin investment or Microstrategy’s bitcoin purchase, but the more bitcoin falls, the bigger the blow.
It is worth noting that the collapse of the third largest crypto exchange did not affect the financial markets. It went on like a non-event, telling us how small the whole area is.
Buying stocks can be boring for those looking for an adrenaline investment. But a closer look at bitcoin versus the S&P 500 in 2022 shows that during the stock market slump, the cryptocurrency outperformed the cryptocurrency by a huge margin.
Furthermore, if you bought bitcoin in December 2017 or five years ago, you would have fallen around -13%, while the S&P 500 would have risen a little over +40%.
The ugly truth is that when it comes to money, retail traders should think twice about what to do with their money. Many people have lost everything they believe in a new form of money.
Instead, they were just part of a bubble that had burst by the time the pandemic was over.