There is a developing trend in story content on major financial news websites: articles featuring those who have lost a ton of cash in the cryptocurrency markets. I get the feeling that we are supposed to feel sorry for these folks, since the headline from one MarketWatch story is “I just wake up and cry”. But the way I feel about these people is the same way I feel about those that get attacked while trying to take selfies with wild animals at Yellowstone National Park, or YouTube influencers that are killed while performing dangerous stunts “for clicks”: They had it coming.
The aforementioned MarketWatch article includes the sob stories of nearly a dozen young men who, in some cases, dumped their entire financial holdings into, what were at the time, red-hot crypto coins with exchange sites that had been in operation for just a couple of weeks. My absolute favorite line is one guy lamenting, “I don’t know what I’m going to tell my wife, she doesn’t even know.”
And that right there is a great indication that those who purchased all of these “coins” knew that what they were doing was incredibly risky and probably stupid. Nobody tells their wife, “Hey Honey, I just bet my entire paycheck on the Packers to cover the six and a half against San Francisco at Lambeau in the playoffs”, because even she knows that Aaron Rodgers is going to come up small again in the post-season.
Expect more of these “I lost it all” stories in the next few weeks, as two of those crypto exchanges, Voyager and Celsius, have frozen all coins they hold and are not allowing people to withdraw what they own. So for those that lost nearly everything in the collapse of the crypto market, they can’t even get the meager scraps back. And that provides some evidence that learned market observers like Warren Buffett have been right since day one of the crypto craze, this was just a giant ponzi scheme where those at the bottom of the pyramid end up with all the losses.
Crypto fanatics always crowed loudest about the lack of federal regulation and the untraceability of transactions as being the future of currency. And yet here are the “investors” left holding the ashes of the system lamenting the fact that crypto deposits do not qualify for FDIC insurance and that Voyager and Celsius pooled all of the assets provided to them instead of establishing individual accounts. Therefore, as these companies move through the bankruptcy process (in Federal Court I would point out), those that gave them actual assets are still going to be seen as unsecured creditors. And in the case of Voyager and Celsius, if the depositors get anything, it could be paid out in a new crypto coin that has a value of exactly zero dollars. But I guess that makes sense, repaying lost and stolen fake money with more fake money.
And those same “no government oversight” folks are now calling for federal investigations and prosecutions of those that founded these crypto companies. The guy that started Celsius reportedly tried to flee the country this month–but I’m sure that was actually a long-planned vacation. However, if I was the Department of Justice or the Securities and Exchange Commission, I would tell these crypto buyers to go back to their Reddit pages and to pound sand. What they owned was no different than Beanie Babies or sports trading cards produced since 1990–items that someone once thought might be worth something someday–but it turns out, no one places any value in them anymore.
As for the guy that doesn’t know what to tell his wife? I’d recommend he tell her not to Google search his name anymore, and to get one of the millions of part-time jobs currently available to make up for the cash he literally flushed down the toilet thinking that he was going to out-smart the market.
