Crypto's Crash Isn't Just About Crypto

Here we are again: another crypto winter.

Bitcoin’s price has dropped 70% since November — the seventh time since its inception that this has occurred.

There are lots of reasons why this is occurring that are unique to crypto: There’s too much leverage, and it’s getting purged (similar to what real estate experienced in 2008); speculators got carried away with many crypto projects, from NFTs to algorithmic stablecoins; investors forgot the mantra “never chase yield” and found themselves grabbing for 18% interest rates that have started to prove ephemeral; and more.

Winter is indeed upon us, and it won’t be over for many months.

But the crypto winter of 2022 is not just about crypto. The global economy is suffering, with all asset classes floundering except energy and (so far) real estate. And we all know why: rising inflation and interest rates, a struggling labor market, supply chain shortages, a projected global food crisis, the lingering pandemic, and the big wild card, Putin.

Indeed, stocks are in a bear market, with many performing even worse than Bitcoin. Peloton is down 91% in the past year. So is Carvana. DocuSign is down 77%. Snapchat 81% in the past year. All have performed worse than Bitcoin — and your clients are likely to own more of them, too.

Anyone who points at Bitcoin’s volatility should first look at stocks during this mayhem. In a single month, GameStop fell 76%. Netflix fell 49%. Meta (nee Facebook), down 38%. By comparison, Bitcoin’s biggest one-month decline in this debacle is 42%.

We see similar examples with daily declines. Netflix lost 35% in a single day, 26% for Facebook and 25% for Target (its biggest one-day drop since 1987). See the chart for more.