100 days of cryptocurrency panic: those who got rich, plummeted and blew their positions

“The cryptocurrency circle is a meat grinder, and the rise and fall is just too exciting.”

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Article | Deep Burn (shenrancaijing), Author | Zhou Jifeng

“I don’t hold any cryptocurrencies anymore.”

A cryptocurrency player who invested in bitcoin and dogcoin lost all his principal and silently quit the cryptocurrency circle after experiencing the collective plunge of cryptocurrencies on May 19.

And just a few days ago, he was impassionedly discussing the direction of this bull market. In a way, this player seems to be the epitome of the whole cryptocurrency circle in these nearly 100 days.

Since the end of last year and especially since February this year, cryptocurrencies have ushered in a bull market, and everyone from small ordinary leeks to big capital giants have started to join in this crazy gambling game. In the short span of 100 days, countless crazy stories related to wealth and greed have been staged. In the past, young people are keen to “make money” by speculating in stocks and funds, but this year they want to play something more exciting – speculation in coins.

They go in with the purpose of making big money, trying to become a pig standing on the wind. After all, in the cryptocurrency world, there are legends of overnight riches every day, and in the words of the cryptocurrency industry, what you don’t have is “the fun of being poor”.

But the bull market comes and goes quickly, and on May 19, cryptocurrencies began to plummet, with 580,000 people blowing up their positions within 24 hours, for a total of $6.91 billion. Newcomers to the cryptocurrency world felt for the first time that “the cryptocurrency world is a meat grinder, and the ups and downs are too exciting”.

In fact, cryptocurrencies are highly volatile, risky and prone to bubbles. Some people have become rich overnight, but many others have become penniless and in debt.

A player who has long been concerned about crypto coins pointed out, “There is never sympathy in the cryptocurrency circle, only sickles and leeks.”

A day in the cryptocurrency circle is a year on earth
There is a famous saying in the cryptocurrency circle, one idea of heaven and one idea of hell.

Xiao Lin, who was new to the cryptocurrency circle for only three days, felt the meaning of this saying for the first time on May 19.

The first thing you need to do is to get a good idea of what you are getting into.

The first thing that I didn’t expect was that before I made a lot of money, something bad happened. 5:00 p.m. on the 19th, Xiaolin, who had been watching the market, suddenly found that the upward green K-line turned red and started to go down, and everything happened so fast that he didn’t understand what was happening, and in just ten minutes, the dog coin fell by more than ten points. The panic-stricken Xiaolin, who had never seen this before, hurriedly sent the screenshot to the group of investors in dogcoin and asked his friends, “What’s going on?”

What Xiao Lin didn’t know was that he had suffered the biggest plunge in the cryptocurrency world in recent months. On the same day, the news of the cryptocurrency collapse once hit the hot search. Not only dogcoin, but also cryptocurrencies plummeted across the board, with bitcoin once falling below $30,000 per coin, down 30% in 24 hours; ethereum fell below the $2,000 mark, down more than 40%; and dogcoin lost $0.3 per coin, down more than 40% during the day.

The cryptocurrency circle is in a state of mourning. Many new leeks who just stepped into the cryptocurrency circle felt the cruelty of the cryptocurrency circle for the first time. In this plummeting game, Xiaolin is not the only one who has suffered heavy losses.

Li Liang, a self-proclaimed ordinary gambler old leek, suddenly received a notice that he was going to blow his position on the night of the 19th. Li Liang hurried to cover the position, but it was too late, more than 100,000 yuan hit the water. “I did not dare to use more than ten times or even tens of times of leverage, only three times of leverage. I didn’t think it would still go wrong.”

In fact, like Li Liang, more and more people in the cryptocurrency circle are not satisfied with the general bullish and bearish, and have started to play the game of “betting long and short” with tens or even hundreds of times of leverage. Leverage can increase profitability in the short term, but once you encounter losses, you will also face the situation of losing all your money. If the loss amount exceeds the deposit, then it will be forced to sell all, that is, “burst”.

Data from Bitcoin Home shows that because of the plunge on the 19th, as of 7:30 a.m. on May 20, about 580,000 people had exploded their positions in the past 24 hours, totaling $6.91 billion (about 44.4 billion yuan).

Three hours after this plunge, these cryptocurrencies have started to rebound. But there are many people who didn’t tense up and didn’t wait for the price to rebound and were ready to cut their meat. A netizen who invested in dogcoin tweeted that he bought it when it was $0.53, thinking it was a bottoming out, but it fell all the way down just after he bought it, so he sold it at $0.27. He didn’t expect it to rebound just after he sold it, and it rose to $0.35 at once. The meat was cut for nothing, and he or she also grew into a new emerging leek.

This plunge was previously foreshadowed. Market research firm Arcane Research said the drop in market sentiment came after the bitcoin price plunged over the past week. The bitcoin market has turned “extremely panicky” after the price fell below $50,000.

And, more recently, countries have begun to tighten their regulations on cryptocurrencies. For example, at its 51st meeting, the State Council’s Financial Stability Development Committee made it clear that it would crack down on bitcoin mining and trading practices and resolutely prevent individual risks from being passed on to the social sector. After the news came out, the peripheral cryptocurrency market plummeted again.

A short-lived orgy of wealth
This plunge comes after nearly half a year of madness in the cryptocurrency world.

At the end of last year, especially since February this year, the cryptocurrency market saw a bull market. Bitcoin went up like crazy, with the price once exceeding $64,000 per piece. Bitcoin’s surge has also driven the prices of other cryptocurrencies higher.

What makes this bull market different from the past is that some cryptocurrencies, which were originally born out of spoofing, are starting to gain traction.

For example, dogcoin, a cryptocurrency born out of bitcoin satire, has increased in price by more than 100 times in just a few months.

Even more exaggeratedly, Shiba Inu coin (SHIB, also known as Shitcoin), which was inspired by Dogcoin, staged an absurd drama some time ago. This is because Musk left a message under a tweet about SHIB saying, “I’m looking for a Shiba Inu dog.” Subsequently, the price of SHIB shot up. And, at 17:00 on May 10, SHIB landed on the Cryptocurrency Exchange, and only ten minutes after it went live, the exchange announced the suspension of all withdrawals due to traffic overload, and only resumed withdrawals at 17:34.

In addition to Shiba Inu coin and dog coin, all kinds of dog coin, fox coin, piggy coin, ant coin, rabbit coin, and even Pikachu coin have emerged, and their popularity has even overshadowed mainstream cryptocurrencies such as bitcoin and ethereum.

The logic behind many people flocking to the cryptocurrency world is simple, as one netizen pointed out, “Bitcoin has doubled at least 400,000 times, creating how many people with freedom of wealth. As long as you don’t play with leverage and put a few tens of thousands in there, it might change your life directly after a few years, even if you lose money, it’s not a big deal.”

The price of bitcoin was less than 1 cent when it was first offered in 2009, and 1 dollar could be exchanged for 1,300 bitcoins, soaring to $18,000 by the end of 2017, after which it continued to fluctuate, experiencing another round of insane increases again from the end of 2020, and in March 2021 bitcoin had broken through the $60,000 mark, and despite a recent drop to nearly $40,000, it still skyrocketed by several thousand times. That means that if you bought bitcoin in the early days for the price of a pack of cigarettes, you’re now at least financially free.

But today, bitcoin is a “high roller” and it’s hard to see how it can skyrocket thousands of times. Everyone is counting on these cottage coins and animal coins to turn over.

Steven, a post-90s player, saw that his colleagues were buying dogcoins and SHIB, so he got his hands on 600 yuan. Another post-90s player, Yuzi, who basically had little investment experience and did not know what crypto coins and blockchain were, was surprised to find that his earnings quadrupled in two days’ time after investing only 400 yuan at the beginning. He realized, “This is the only chance I have to change my class.”

As one microblogger said, “After entering several SHIB groups, I found that they were actually all post-95s and post-00s. They hoard SHIB is to buy a hope. The traditional market told me that houses hold their value, which I can’t afford; people who have made money in the cryptocurrency circle told me that bitcoin holds its value, which I can’t afford as well.”

On the eve of the crash, the whole market mania has reached its peak. The Terror and Greed Index, developed by CNNMoney, attempts to visualize the changing sentiment in the cryptocurrency market. In the case of Bitcoin, for example, the Terror and Greed Index for Bitcoin reached 79 at one point, meaning that the market was already very greedy (0 being “extremely fearful” and 100 being “extremely greedy”).

Because the market of cryptocurrency is so good, many young people have made money from their first investment. Perhaps the money came too fast, and there are not a few who were overwhelmed by the windfall. A financial vlogger shared that many newcomers to the cryptocurrency world rushed in when they saw a good token project and ended up being cut as leeks. But these projects are often imitations of successful projects. For example, some so-called projects actually issued 10 billion coins, but these project parties may have 9 billion in their hands, and when everyone bought in, the price of the coins went up, the project parties of the piggy bank sold the 9 billion in their hands instantly, without any cost to circle the money and run away. “This is the pig killing plate, but these newcomers to the cryptocurrency world many times can’t tell the difference, they will only attribute the success of shitcoin and dogcoin to their own ability. Because it was so easy to make money at the time.”

Observing the spectacle in recent months, an industry insider who has been following crypto coins for a long time pointed out, “When more and more people understand that crypto coins can be invested, the bull market actually comes to an end and the crash will definitely come, I don’t know exactly which day, but I know it will definitely come.”

What I didn’t expect was that this day would come so soon.

Who can make money?
99% of people come to the cryptocurrency world to get rich, but it’s not that easy to get rich.

“In fact, 90% of people are not rich overnight, which means there will be a long period of accumulation, and then they earn a lot when the market is good at one time.” Pixar, who has been in the cryptocurrency world since 2017, noted. To put it bluntly, you have to pay tuition a few more times and be cut leeks a few more times.

Another player who has been following the cryptocurrency circle for a long time, Xiao Bin, likewise believes, “Don’t look at Bitcoin rising from less than a dollar to close to $40,000 a piece now, but in reality there are not that many people who are really rich.”

After all, the risk is too high and the temptation is too great in the cryptocurrency world.

Due to the lack of regulation and high liquidity, the price of cryptocurrencies is extremely volatile, and cryptocurrencies have no up or down restrictions and are traded 24/7, making the risk far greater than the stock market.

Pixar entered the circle in 2017, and that year he invested 100,000 yuan to the final loss to only 20,000 yuan. With such a painful experience, he realized that he still needs to understand and learn about blockchain in the cryptocurrency world, or at least know how the logic works inside, and by the way, he also needs to know a bit about finance, politics and other related fields.

In addition to understanding crypto coins, perception and timing are also important. “How do you know if it’s up or down when it goes up to 3,000? It’s a matter of perception. Also, timing is important; if someone bought in late 2017, it will take a two-year hibernation period to see the upside in 2020.” Pix noted.

And, like a roller coaster, wealth in the cryptocurrency world comes and goes quickly. Especially after a low point and huge losses, it is a great test of the mind to stay calm. For example, Li Liang in 2017, casually put in more than 10,000, when catching up with the market, the return on principal almost reached 100 times, the highest return to seven figures. The money came too fast and too much. “I’ve never seen that much money in my life.” I didn’t expect that the whole digital currency market suddenly became worse, Li Liang panicked, and then began to play with the leverage, and finally the money earned by luck, all lost in by strength.

The “leeks” are chasing the ups and downs, but in this wealth-related game, ordinary retail investors are basically at the bottom of the food chain. The real players behind the scenes are making a fortune.

For example, those who open exchanges will always make money, regardless of whether they are up or down. Take Coinbase, the largest cryptocurrency exchange in the United States, for example, which was successfully listed on April 14. The company reported total revenue of $1.8 billion in the first quarter of 2021, with most of the revenue coming mainly from transaction fees, and was incredibly profitable, with a net profit of $771 million in the quarter, much higher than the $32 million in the same period last year.

In addition to exchanges, Pixar noted that mining farm owners who mine are likewise mooching.

The emergence of mining farms is tied to the way bitcoin is produced. Bitcoin requires the person who produces it to “mine bitcoins” using a specific algorithm. The equivalent of this is that whoever gets the question right first gets the corresponding bitcoin reward, first come, first served. The number of bitcoins is limited, and at the beginning, the virtual currency is easy to mine, and the power consumption is not very high at this time. However, as mining becomes more difficult, the power consumption becomes larger and the energy consumption becomes high.

In this mining game, many people buy mining machines, set up their mines in power-rich areas and start mining on a large scale. According to a February 17 report in the Wall Street Journal, the Chinese now hold 70% of the world’s bitcoin processing power. Cheap water and electricity resources have put the Chinese firmly on the iron throne of mining.

“And mining farm owners, who mine the equivalent of a gold mine in hand, can hoard coins when prices are low and sell them when they are high.” Pix noted.

In addition, many institutions and capital giants are making big bucks in this game. Tesla, for example, has made a lot of money by speculating in bitcoin. Tesla said it sold some of the $1.5 billion worth of bitcoin it bought in February in the first quarter, contributing $101 million in profit for the quarter. That amount was close to a quarter of the company’s total profit for the quarter.

It’s not just Tesla that is starting to speculate in cryptocurrency, but more and more institutions are starting to join the coin speculation bandwagon.

Since 2020, many overseas companies have started buying bitcoin to fight inflation because of factors such as global central bank liquidity easing. For example, in December last year, Ruffer Investment Management, a British investment house with $27.3 billion in assets under management, suddenly announced that it was investing 2.5% of its portfolio in bitcoin.

But in its current form, it looks like the good times are over for crypto coins. Domestically, the State Council’s Financial Commission has taken a stand to crack down on bitcoin mining and trading practices, and the U.S. is preparing to crack down on people who use bitcoin for tax evasion.

Despite the fact that investing in cryptocurrencies is risky and that the dealers and exchanges are the real winners, believers remain enthusiastic about cryptocurrencies. After the plunge, the gamble doesn’t seem to be over.

One bitcoin player told Deep Burn: “I remain convinced that the future of digital currencies, including bitcoin, will be bright.”

And as Nobel Prize-winning economist Paul Krugman put it, bitcoin is a cult-like digital currency that will always find new converts who will ensure its indefinite survival. “I’ve given up on predicting the imminent demise of Bitcoin. There always seems to be new believers. Maybe they just see it as a cult that can survive indefinitely.”

*At the request of the interviewee, Li Liang, Pix, Xiao Bin, Xiao Lin, Steven, and Yuzi are pseudonyms in this article.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/100-days-of-cryptocurrency-panic-those-who-got-rich-plummeted-and-blew-their-positions/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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