Crypto Losses

A wise professor once told his class, “there is such a thing as a paper profit, but all losses are real.”

What do you suppose he would think about the tragic losses in the crypto market. More than $2 trillion, and that’s US dollars? I think he would say People will feel bad about their losses and some will become harmed by those losses, but I would be surprised if much real money has been lost.

He would likely be right if you assume fiat currencies are real money, but that’s a different discussion.

The problem is averaging out.

Suppose someone invested $2,000, real currency into bitcoin in 2017. They use the value that appears to get involved with Ethereum and some other minor coins. At its peak, they have close to $10,000,000. As it starts to fall, they address their problems and adjust their holding. Now they have $300,000. Did they lose $9.7 million, or did they make $298,000?

That’s nearly a philosophy question.

On average, the crypto crash won’t have much effect on the economy because it was never a serious part of the economy, more like a game.

The problem will be the individuals. The ones who lost real money will suffer the effects. Those who lost their paper profits will feel bad but be otherwise unaffected.

Some lost nearly $10 million and are better off than they were 5 years ago. How does that work?

Will crypto recover?

Probably. It does serve a useful purpose, and once the wrinkles get sorted out and the manipulators and other bad guys are removed, you will see value emerge. There are new platforms in development that reduce the costs to transact and add other services.

The speculative nature is going away, though. It is unlikely that people who thought it was a way to preserve value will reappear in the market. It is also hard to picture people thinking they can make 5,000 times their money in a few years.

Expect a rational market where the best are worth owning, and the rest will cease to exist.

The bit to takeaway

It is too soon to dismiss crypto completely.


I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email at don.shaughnessy@gmail.com.

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